Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

NATIONAL PROVIDENT INSTITUTION BILL [Lords]

SAINT DIONIS BACKCHURCH CHURCHYARD (AMENDMENT) BILL [Lords]

Read the Third time and passed, without Amendment.

MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (SHOREHAM AND LANCING) BILL

PIER AND HARBOUR PROVISIONAL ORDER (KING'S LYNN CONSERVANCY) BILL

Read the Third time and passed.

PIER AND HARBOUR PROVISIONAL ORDER (BIDEFORD HARBOUR) BILL

As amended, considered; to be read the Third time Tomorrow.

PETITION

Railway Branch Lines (Closure)

Mr. Charles A. Howell: With your permission, Mr. Speaker, and the leave of the House, I would like to present a petition signed by 6,000 of my constituents and the citizens of Birmingham conurbations.
As the House will know, Birmingham is very conscious of the accident rate; in fact, it introduced a system of dipped lighting with a view to reducing the holocaust on the roads.
As a result of the recent closures and the proposed closures of branch lines and railway stations, the signatories to this Petition feel that, if continued with, the proposal contained in the Beeching

Plan will increase the traffic on the roads and thus increase the accidents and even the deaths on the roads.
The Petition, which I propose to read, is as follows:
To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
The Humble Petition of the Midlands Save the Railways Campaign, sponsored by the Associated Society of Locomotive Engineers and Firemen, the National Union of Railway-men and the Transport Salaried Staffs Asssociation, showeth:
That the application of the Beeching Report to railways is not in the best interest of the country's transport.
Wherefore your Petitioners pray that there be instituted an early, comprehensive national survey of all forms of transport, including all costs, to ensure that traffics use the most economic and efficient forms of transport in the national interest, that there be no further application of the Beeching Report, which deals harshly with the railways in isolation, until such appraisals of all forms of transport into national or regional public services.
And the Petition ends:
And your Petitioners, as in duty bound, will ever pray.

To lie upon the Table.

Oral Answers to Questions — NATIONAL FINANCE

Income Tax Payers (Press Cuttings)

Mr. Driberg: asked the Chancellor of the Exchequer what representations he has received from the National Council for Civil Liberties on the case of Mr. Ken Bourne, a shop steward whose Income Tex file at the local Inland Revenue office contained a newspaper cutting relating to his activities in connection with an industrial dispute; and if he will circulate in HANSARD his reply thereto.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter): I will circulate in the OFFICIAL REPORT the text of a letter which I received from this body and of the reply sent on my behalf.

Mr. Driberg: Why is this dubious procedure necessary at all? Is it not


possible to obtain all the necessary particulars of a man's income from the employer's return or, if a man is involved in a strike and draws strike pay over a prolonged period, possibly from the union concerned? Or does the Inland Revenue not trust this particular employer or the union?

Mr. Boyd-Carpenter: There is nothing dubious about this procedure. As I explained to the hon. Gentleman when he raised the question some months ago, it is the duty of the Inland Revenue to be aware of matters which may affect an individual's tax liability.

Following are the letters:

7th April, 1964.

Dear Sir,

Further to your reply to Mr. Tom Driberg regarding the case of Mr. Ken Bourne, whose personal file at the Inland Revenue office at Harlow contained a newspaper cutting concerning a strike in which, as a shop steward of the E.T.U., he had been involved, we should be grateful if you could advise us of the steps taken by the Inland Revenue to collect information concerning individuals.

In the case of Mr. Bourne, reference has been made to a newspaper clipping but your reply suggests that it is the Government view that Inland Revenue should collect information regarding individuals. We would appreciate it if you could clarify the situation and advise us whether in fact a special staff is maintained for this purpose; whether information is compiled on a haphazard basis regarding all those affected by Inland Revenue regulations; or whether advantage is taken of information collected by M.I.5 or Special Branch of the Police.

Yours faithfully,

MARTIN ENNALS,

General Secretary,

National Council for

Civil Liberties.

7th May, 1964.

Dear Sir,

The Chief Secretary to the Treasury has asked me to reply to your letter of the 7th April about his Answer to Mr. Tom Driberg's Parliamentary Question about the case of Mr. Ken Bourne.

Mr. Boyd-Carpenter made it clear that the Inland Revenue are not concerned to collect information about a taxpayer which does not bear on his lability to tax, but that on the other hand it is their duty to record any information relevant to tax liability which comes to their attention through press reports. There is, of course, no question of a special staff; the officer in the local Tax Office who is dealing with the particular taxpayer's affairs would take note of any such information in the ordinary course of his duties.

You will appreciate that the primary source of information regarding a taxpayer's income is the return which he is required to make under statutory provisions. This information may be supplemented and checked by a variety of statutory returns which may be called for from third parties. For example, employers make returns of remuneration paid to their employees; banks make returns of interest paid to depositors. There is no statutory power to require information from Government Departments and other public authorities as such.

Yours faithfully,

F. G. BURRETT,

Private Secretary.

Mr. Driberg: asked the Chancellor of the Exchequer what procedure is followed in deciding whether a press report is relevant to an individual taxpayer's Income Tax liability, and that cuttings of such reports should, accordingly, be included in his file; whether such cuttings are collected systematically or at random; and what steps are taken to check the accuracy of the reports and to ensure that, if a correction is published subsequently, this also is included in the file or the original cutting destroyed.

Mr. Boyd-Carpenter: There is no set procedure; it is a matter of applying common sense.

Mr. Driberg: In that case, can we assume that the cuttings are collected at random and that no attempt is made to check their accuracy?

Mr. Boyd-Carpenter: The hon. Gentleman can make no such assumption. As I have explained in reply to his previous Question, this is a perfectly commonsense variation on the duty of officers of the Inland Revenue to inform themselves of matters which may affect an individual's tax liability or may enable returns in respect of him to be checked.

Mr. Driberg: Since the right hon. Gentleman seems to imply that the cuttings are not collected at random, can we take it that they are collected systematically, and if so how—by means of enormous subscriptions to a press cutting agency, or what?

Mr. Boyd-Carpenter: They are collected by the individual officer in the course of his duties, neither at random nor systematically.

Mr. Driberg: In view of the unsatisfactory nature of the reply, I give notice that I will raise the matter on the Adjournment.

Bank Holidays

Mr. Costain: asked the Chancellor of the Exchequer whether he is aware that the abolition of all national bank holidays and the substitution for them of agreed local holiday arrangements between employers and trade unions would be a factor in limiting the increase in road deaths at times of public holidays; and if he will open negotiations with both sides of industry with a view to such arrangements.

The Economic Secretary to the Treasury (Mr. Maurice Macmillan): I would refer the hon. Member to the reply which my right hon. Friend the Prime Minister gave in response to a similar Question on 2nd June.

Mr. Costain: I appreciate the Prime Minister's desire to ensure that people have communal holidays, but would not my hon. Friend convey to his right hon. Friend the fact that the peak loads on the roads are causing a serious number of accidents, and is he satisfied that in these circumstances people enjoy the best benefits of the seaside when they arrive there? Would he not agree that the best way to make our nation most efficient is to avoid peak loads? Would not this procedure help to avoid peak loads?

Mr. Macmillan: As my right hon. Friend explained, quite a part of the peak load problem is due to the adding of the August and, to some extent, Whitsun bank holidays to the normal holiday period. In my right hon. Friend's Answer he explained about the experiment which is to be carried out next year, but I will certainly convey my hon. Friend's suggestion to him.

Mr. Gresham Cooke: Would my hon. Friend also consider that bank holidays were introduced when holidays were few and far between and that we have now really got past that stage, and that there is absolutely no doubt that the crowding of roads has a direct ratio to accidents and, therefore, there is a strong case for spreading holidays throughout a longer period?

Mr. Macmillan: These are among the considerations which will be taken into account when the experiment and its results are considered.

Building Land

Mr. Ridley: asked the Chancellor of the Exchequer what estimate he has made of the percentage tax that would have to be imposed on all transactions in building land, to yield on average, £100 million in a full year.

Mr. Boyd-Carpenter: I am afraid not, Sir, as the facts on which such an estimate would have to be founded are not available.

Mr. Ridley: If my right hon. Friend does not even know that, would he not agree that it makes it even more difficult to assess the effects of a Labour land commission? How could we possibly guess by how much the price of land would go up for a given yield from such a source?

Mr. Boyd-Carpenter: I agree with my hon. Friend. While this makes it clear that it would be difficult to give a precise assessment of the project to which he refers, it makes it abundantly clear that it would be wholly disastrous.

Mr. Callaghan: Instead of applying his dialectical skill to destroying these propositions, would it not be more appropriate in a Minister of the Crown to devote his attention to methods of getting rid of what is regarded on all sides as a growing public scandal?

Mr. Boyd-Carpenter: These propositions require no dialectical skill to destroy. They come to pieces on their own.

Covent Garden Opera (Seats)

Mr. Ridley: asked the Chancellor of the Exchequer if he will make it a condition of his grant to the Arts Council for the next financial year that they conduct a survey of those who obtain seats at Covent Garden.

Mr. Maurice Macmillan: No, Sir.

Mr. Ridley: Would my hon. Friend agree that; there are a considerable number of probably ill-informed criticisms going around about this matter? Would he not further agree


that it would be better to bring the matter out into the open by having this inquiry or publishing some analysis of how the seats are allocated so that the good name of the theatre can be cleared?

Mr. Macmillan: My hon. Friend is right. There is a belief that Covent Garden seats are allocated unfairly, but I am assured that this is not so. The box office system is designed to make seats available to the public as widely as possible. One of the difficulties is that the most popular performances are not performed very often and, therefore, the demand far exceeds the supply.

Mr. Snow: If the Question is intended to include the allocation of complimentary seats, is the hon. Gentleman aware that there is some support for the general proposition that this needs looking into? Is he aware that it is unfair to provincial attenders at Covent Garden who never seem to be able to get seats on first nights, and that a casual scrutiny of gossip columns in the popular daily Press, including such masterpieces as "Jennifer's Diary," would seem to suggest that there is a rather common factor of people who attend first nights?

Mr. Macmillan: The only priority booking is given to holders of subscription vouchers, which any member of the public is entitled to buy, and that gives a limited degree of priority of consideration. There are also premium stalls or boxes which can be bought regularly for every or every other performance. These not unnaturally carry with them the burden that one has to pay for the less popular performances as well as for the more popular. For the rest, I think that the box office system operates as fairly as possible. The full first night list is of very limited proportions, being confined to about 134 seats in all.

Mr. Ridley: In view of what my hon. Friend has said, could he publish some statement as to how the system is worked so that we can all be clear and so that the name of the opera can be cleared over this matter?

Mr. Macmillan: I think that the sort of inquiry which my hon. Friend originally suggested would be more expensive to carry out than the probable

results would justify, but I will ask the Arts Council to request Covent Garden to prepare a factual note about how the box office system operates, and I will then make copies available to my hon. Friend and to other hon. Members in the Library.

Sir B. Stross: Is the Economic Secretary aware that, until recently, there was some ground for criticism in view of the fact that students were getting preferential treatment and obtaining a fairly large number of tickets which they themselves did not use but sold to their own advantage, and that this has now been stopped? Is he further aware that what appears from the Question is quite evident, namely, that we need further patronage for opera and another opera house? There is really not enough for the people who would like to see opera at its best.

Mr. Macmillan: I am aware of the considerations which the hon. Gentleman mentions, and I am happy to confirm that such abuses as there were have been put right. I think that the difficulty about the demand for opera is that it is very uneven. It is the star performances which attract a very heavy demand. With some of the other performances there is not quite the same difficulty in getting seats. I would suspect that the demand, though limited, is extremely intense, and it is the intensity which has caused some of the ill-feeling, because from the point of view of the customers the only successful box office policy is one which enables each individual to get the seat he requires when he requires it.

Prices

Mr. Bence: asked the Chancellor of the Exchequer what has been the percentage increase in the level of prices each year since 1951; and what estimate he has made of what proportion of the increase in Government expenditure as laid down in Cmnd. 2235 may be accounted for by an increase of the level of prices.

Mr. Boyd-Carpenter: On the first part of the Question, it depends on what prices the hon. Member has in mind. There are several published price indices, and they have not all moved in the same way. On the second part of the


Question, none of the increase in Government expenditure shown in Command Paper No. 2235 is attributable to price increases because, as is explained in paragraphs 5 and 11 of the White Paper, the calculations are at constant prices.

Mr. Bence: Do we take it from the right hon. Gentleman that the assumption is that there will be no increase in price in the next three years, and if that is so, why is it that in the £360 million there is no provision for increased pensions?

Mr. Boyd-Carpenter: There is no such assumption as the hon. Member seeks to read into my Answer or into the White Paper. It is the normal, and, I think, helpful, practice, in order that comparisons shall have reality, to express documents of this kind in constant prices without making any assumption necessarily as to the course of prices over the period covered.

Mr. J. T. Price: The right hon. Gentleman has stalled the question by saying that there is a difficulty in providing the statistics. If there had been a fall in prices over the period mentioned instead of a dramatic rise, would the right hon. Gentleman be standing at the Dispatch Box putting forward a statistical excuse for not giving information which the House is entitled to have?

Mr. Boyd-Carpenter: I am not saying that there is any defect in the materials that I have. If there be a defect, then, with all due respect, it is in the Question.

Public Expenditure

Mr. Bence: asked the Chancellor of the Exchequer what proportion of the increased revenue required to finance the increased public expenditure set out in Public Expenditure 1963–64 and 1967–68, Command Paper No. 2235, will be raised by borrowing

Mr. Boyd-Carpenter: This is a matter to be decided in the context of the Budget for each year in question, and the hon. Gentleman will not expect me to anticipate my right hon. Friend's next three Budget statements.

Mr. Bence: It was on the conviction that the right hon. Gentleman and his right hon. and hon. Friends would not be presenting future Budgets that I put

down this Question to ascertain whether there was any provision for increasing taxation or for extra borrowings. It is on that that I would like an answer.

Mr. Boyd-Carpenter: It is a question for each Budget and for the judgment of the Chancellor of the Exchequer to decide, in the light both of the level of public expenditure and the demand on the economy, what proportion of that total expenditure should be met out of taxation and what proportion out of borrowing.

Mr. Callaghan: As the increase in expenditure is to be at the rate of 4·1 per cent. per annum for four years in succession, can the right hon. Gentleman tell us whether there has been any period in the lifetime of this Government since 1951 when they have managed to sustain a growth rate of 4·1 per cent. per annum for four successive years? If not, how does he propose that it should be financed by a Labour Government?

Mr. Boyd-Carpenter: The hon. Gentleman has put the snag in the tail of that supplementary question. What is possible and will be achieved under the Conservatives would plainly be impossible under a Socialist Administration.

Mr. Speaker: Commander Kerans. Question No. 10.

Mr. Callaghan: With respect, Mr. Speaker, we had seven supplementary questions about Covent Garden.

Mr. Speaker: Order. We are not making very good progress.

Mr. Bence: On a point of order.

Mr. Speaker: Order. In so far as we spread ourselves about Covent Garden, I accept the blame.

Mr. Bence: On a point of order. In view of the unsatisfactory nature of the reply to both my Questions, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

Government Departments (Day Releases)

Mr. Boyden: asked the Chancellor of the Exchequer if he will state the


three Departments with the highest percentage of day release for juveniles under 18 years of age and the three lowest, giving the proportion of those under 18 years of age given day release in each of these Departments.

Mr. Boyd-Carpenter: All the boys and girls under 18 at the Home Office, three of the Scottish Departments and the Department of Education and Science attend day release classes. The three Departments where the fewest proportionately of young people under 18 attend these classes are the Army Department and the Air Department of the Ministry of Defence and the Treasury, for which the figures are, respectively, 642 out of 942 eligible, or 69 per cent., 367 out of 512 or 71 per cent., and 24 out of 58 or 41·4 per cent. These figures relate to non-industrial staff only.

Mr. Boyden: Is the right hon. Gentleman aware that the situation in relation to industrial staff at the Army Department is still worse? In view of the obligations the Government are laying on industry and the encouragement they are giving to it to facilitate day release, will not the right hon. Gentleman get his right hon. Friends to do something about the Army Department? Does not he consider it ridiculous that, whereas some Government Departments have had 100 per cent. day release, there is a relatively much lower percentage in the Army Department?

Mr. Boyd-Carpenter: We are very much concerned about this. In many Departments attendance by those under 16 is compulsory; it is, however, voluntary between the ages of 16 and 18. In the Treasury the training officer sees all young officers in these age groups and draws their attention to the importance of the day release scheme. I think the hon. Member will agree that to carry pressure or compulsion too far in a matter of this sort might well be self-defeating.

Mr. Dalyell: asked the Chancellor of the Exchequer how many female clerks between the ages of 15 and 18 years are employed by his Department; and how many are granted day release.

Mr. Boyd-Carpenter: There are ten female clerks between the ages of 15 and

18 employed in the Treasury eligible for day release. All are encouraged to take advantage of these facilities. Five are attending classes and one will begin in September. Two have attended classes but recently stopped doing so.

Mr. Dalyell: How does the Minister reconcile his statement of principle with the answer given to my hon. Friend the Member for Bishop Auckland (Mr. Boyden) that if at the Treasury pressure of compulsion is carried too far it will be self-defeating, when in fact there is compulsory day release at the Home Office?

Mr. Boyd-Carpenter: We are dealing with somewhat different staffs, and we must use our judgment in respect of them. As I said in reply to the hon. Member for Bishop Auckland (Mr. Boyden), we apply compulsion up to the age of 16.

Retired Government Employees (Employment)

Mr. Boyden: asked the Chancellor of the Exchequer if he will revise temporarily the superannuation and salary arrangements for retired Government employees, such as teachers and some categories of local authority employees, where there are serious shortages of trained staff, so that adequate financial rewards can be made to such people if they resume employment, full or part time, in those occupations where shortages of staff are persistent.

Mr. Boyd-Carpenter: No, Sir. I have no proposals for changes in the present arrangements which seem to me to provide reasonable remuneration.

Mr. Boyden: Does not the right hon. Gentleman realise that the position as regards superannuated teachers is ridiculous? A teacher who retires on a low salary and goes back to teaching is not allowed to earn as much salary as a teacher on a much higher pension. Can he not at least correct this anomaly in view of the serious shortage of teachers and the desire of the Secretary of State for Education and Science to keep more superannuated teachers in schools?

Mr. Boyd-Carpenter: The general principle is that a public servant who retires and who is re-employed again


should not, while re-employed, draw a total income—salary and pension together—more than he was drawing immediately prior to retirement at the end of his career. On the whole, I think that this is a sound principle, and the House will remember that re-employment has an effect in improving the ultimate pension.

Mr. Bourne-Arton: Is my right hon. Friend aware that the suggestion in the Question implies a very sensible and practical way of dealing with some very serious shortages? Will he not allow a general principle to interfere with anything that can be done, for example, to find the additional teachers so desperately needed?

Mr. Boyd-Carpenter: I do not think I can go as far as that. The general principle is of considerable importance. But I very much sympathise with the desire to deal with the problem, which in certain areas is acute.

Mr. Rankin: Does not the right hon. Gentleman realise that, if a teacher who has earned his pension in his own profession returns to work in any other profession, he can draw the pension which he is refused the right to draw if he returns to the teaching profession, which needs teachers? Does he think that that is just?

Mr. Boyd-Carpenter: I know few, if any, private employers who will pay a pension to a person while continuing to employ him.

Mr. Gourlay: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

Victoria Station (Customs)

Mr. Gresham Cooke: asked the Chancellor of the Exchequer (1) what is the cost in terms of money and man-hours per annum in keeping a Customs officer supervising and asking questions of travellers leaving this country by means of trains for the Continent from Victoria Station;

(2) whether, to bring Customs practice at Victoria Station into line with that at London Airport, he will discontinue the practice of Customs officers examining

outgoing passengers leaving the United Kingdom by train.

Mr. Maurice Macmillan: As export and currency controls remain necessary, selective examination of outgoing passengers continues at all exit points, including Victoria Station and London Airport. No officers are kept at Victoria solely on account of these duties, which include the clearance of Purchase Tax-free parcels, since they are undertaken by staff serving at the station for other Customs purposes.

Mr. Gresham Cooke: As there is practically no Customs inspection in any part of Europe now, is it not rather old-fashioned to keep a Customs officer for outgoing passengers at Victoria Station? I have never been selected for Customs inspection on outgoing journeys at London Airport. [HON. MEMBERS: "You will be."] If such Customs checks are selective there, will my right hon. Friend introduce a selective practice at Victoria?

Mr. Macmillan: I am sorry that my hon. Friend feels neglected by the Customs. The difference in treatment he has noticed may derive from the fact that the selection at London Airport is by aircraft load rather than by individual passenger, whereas at Victoria selective-ness is as between passengers.

Income (Tax Exemption)

Mr. W. Hamilton: asked the Chancellor of the Exchequer to what extent it has been the policy of Her Majesty's Government to pay compensation when incomes which are exempt from tax by ancient Statute cease to be so exempt.

Mr. Boyd-Carpenter: I know of no such case.

Mr. Hamilton: Has the right hon. Gentleman read the speech by the Financial Secretary in a debate on tax-free toll bridges on 10th June? Is the right hon. Gentleman aware that his hon. Friend implied that, if taxation is imposed on something which by ancient Statute is now tax-free, then compensation ought to be paid? If that is accepted as a principle by the Financial Secretary and not by the Government, then surely the Financial Secretary should have some plain speaking and education from the


right hon. Gentleman. Can the right hon. Gentleman say whether, if that is to be a principle, he will apply it to sweets and pots and pans, all of which have had tax imposed on them whereas they were previously tax-free?

Mr. Boyd-Carpenter: I think the hon. Gentleman misunderstood my Answer. What my hon. Friend the Financial Secretary said in his excellent speech—and I am happy to repeat it—is that, if the Government of the day enter into an agreement with a citizen to do something on particular terms, it is quite wrong for a subsequent Government to repudiate that agreement because it seems inconvenient.

Mr. Hamilton: Cannot the right hon. Gentleman accept as a principle that any Government at any time can repeal ancient Statutes, particularly when those ancient Statutes give tax-free bonuses—in many cases, to wealthy people?

Mr. Boyd-Carpenter: One even more fundamental principle is that Governments keep their word.

Nationalised Industries (Capital Investment)

Mr. W. Hamilton: asked the Chancellor of the Exchequer if he will make a statement on the results of his recent discussions with the chairmen of the nationalised industries on the question of reductions in their capital expenditure.

Mr. Ross: asked the Chancellor of the Exchequer to what extent he expects the nationalised industries in Scotland to reduce their capital investment programmes.

Mr. Boyd-Carpenter: When my right hon. Friend and I saw the chairmen, we explained to them the prospect of a rising pressure of demand on our resources and on the building industry in particular and asked them to see what modifications could be made at the margin of their investment expenditure so that major programmes could continue to go ahead safely and economically. We made no specific requests for particular reductions, and in particular stressed the need to distinguish areas such as Scotland where unemployment is higher than elsewhere.

Mr. Hamilton: Is this part of the stop process which has got out of tune with the electoral timetable? Can the right hon. Gentleman say what specific proposals he has for excluding all the areas where there is currently high unemployment? If those areas are excluded, does that mean that the nationalised industries in other parts of the country will have to cut back more severely than would otherwise have been the case?

Mr. Boyd-Carpenter: If the hon. Gentleman will study my Answer, he will see that his supplementary question is founded on the reverse of what I said, which was that it was the purpose of these discussions to avoid the possibility of stop and go by exercising a little reasonable flexibility, as recommended by the Plowden Committee.
As for the second part of his statement; it is common sense, and I think that it is understood by the chairmen, that, for example, it is more sensible at this time to go ahead with projects in areas where resources of labour are available rather than where they are scarce and where there is pressure on the building industry.

Mr. Ross: Is the right hon. Gentleman aware that, whatever substance there is in the Plan for Central Scotland, it is in the increased public expenditure which is being undertaken there? Is he aware that we were told by the Secretary of State for Industry and Trade that concentration was going on there at the expense of other parts of Scotland? Can we now take it that we are getting a flexible rephasing, which really means a cutting down on the promises of a year ago about public expenditure by the nationalised industries in that area?

Mr. Boyd-Carpenter: My Answer means the precise opposite of that. There is a later Question about the figures of public expenditure in Scotland.

Mr. Jay: As the White Papers on both the North-East and Scotland last autumn promised that in the so-called growth areas these public investment programmes would go ahead on an expanding scale, can the right hon. Gentleman say categorically that this new decision does not in any way detract from those promises?

Mr. Boyd-Carpenter: If the right hon. Gentleman studies the last sentence of my Answer, he will be completely reassured.

Cost of Living

Mr. A. Lewis: asked the Chancellor of the Exchequer whether he is aware that the cost of living has now risen to the highest level yet recorded; what was the reason for the latest rise; and on how many occasions since October, 1951, it has fallen below the highest figure recorded in that year.

Mr. Maurice Macmillan: Yes, Sir. The Retail Price Index has not, since October, 1951, fallen below the highest figure recorded in that year; but, since October, 1951, the rise has been progressively less rapid, being just over 2 per cent. for the year up to April, 1964. The recent rise of 1 per cent. was due to the increase in drink and tobacco duties.

Mr. Lewis: Did the hon. Gentleman hear his right hon. Friend a moment ago say that Governments kept their promises? Can we know when the promises to "mend that hole in the purse", "make the £ worth something", "decrease the cost of living", "increase the purchasing value of the £", are to be implemented? Can we be assured that those promises will be implemented before the Government go out of office in October?

Mr. Macmillan: I am sure the hon. Gentleman is aware that the increase in prices over the period of the Tory Government is approximately something under 50 per cent. and that in money terms the increase in average earnings is something more than 100 per cent., the increase in pensions something more than 120 per cent., and that the purchasing power of average earnings has therefore gone up by about 35 per cent. and the purchasing power of pensions between 45 and 50 per cent. in the twelve years of Tory Government.

Mr. W. Clark: Would not my hon. Friend agree that between 1945 and 1951 prices rose much faster than incomes and that since 1951 incomes have risen much higher and faster than prices? Would he also say how the cost of living in this country compares

with that of our overseas competitors, particularly in Europe?

Mr. Macmillan: Yes, Sir. During the 6¼ years of the Labour Administration, the average rise in prices was 6½ per cent. per year. In the first 6¼ years of Conservative Government, the average rise was 4½ per cent. per year. In the second 6¼ years of Conservative Government the average rise was 2½ per cent. a year. In the last year, food prices in this country have gone up by some 1 per cent. while prices in general and food prices in particular in France, Italy and Holland, for example, countries whose performances right hon. and hon. Gentlemen opposite have compared favourably with the economic performance of this country, have gone up five times as fast as in the United Kingdom. In Sweden, with the advantages of a long period of Labour Government, prices have risen nearly 10 times as fast as in the United Kingdom.

Mr. Callaghan: As he was not in the House at the time, I do not suppose the Economic Secretary remembers that the Conservative Government of 1951 were returned on the basis that they would stop inflation. Are we to take it from the complacent replies which we have just had that they have given up any thought of stopping inflation and that, provided average earnings exceed the cost of living, they are ready to tolerate inflation, irrespective of the damage which it does to pensioners and all those on fixed incomes?

Mr. Macmillan: The hon. Gentleman has ignored the fact that pensions have increased in value in real terms. Secondly, my right hon. Friend the Prime Minister and my right hon. Friend the Chancellor of the Exchequer have made it perfectly clear that the fight against inflation is a major part of the Government's policy. It is also clear that the prices of goods which are very largely produced by mass production methods, such as cars, television and radio sets, washing machines and household equipment, have been steady, but that prices have gone up where the cost of production includes a large labour cost element, which emphasises the importance of an incomes policy, as my right hon. Friend has so often stressed.

Several Hon. Members: rose—

Mr. Speaker: I am anxious to make progress.

Mr. Hirshhorn (Art Collection): 

Mr. W. T. Rodgers: asked the Chancellor of the Exchequer what are the terms upon which Mr. Joseph Hirshhorn has offered his art collection to Her Majesty's Government; what obstacles exist to its acceptance; and if he will make a statement.

Mr. Boyd-Carpenter: I have had informal discussions with Mr. Hirshhorn about the possibility of his making his art collection available for permanent exhibition in London on the basis that he would transfer the collection to a foundation created for the purpose under English law and that Her Majesty's Government would provide a site and building and would meet the running costs of the foundation. Mr. Hirshhorn has not yet reached a decision on the matter.

Mr. Rodgers: Would the right hon. Gentleman agree that it is the view of all experts that this is a very distinguished collection which we would be very proud to have in this country? Will he assure the House that he will actively pursue the possibility of bringing it here and not simply wait until Mr. Hirshhorn may make alternative arrangements?

Mr. Boyd-Carpenter: I agree that this is the finest collection of modern sculpture in private hands in the world and that there is also a very distinguished collection of modern American and European pictures. The decision, of course, is for Mr. Hirshhorn, for whom it is obviously a decision of great importance as this collection represents his life's work. However, I can assure the hon. Gentleman that we are very anxious that the collection should come here and we are endeavouring to meet a number of suggestions which Mr. Hirshhorn has made. The decision, of course, lies with him.

Treasury (Chartered Accountants)

Mr. Emrys Hughes: asked the Chancellor of the Exchequer how many chartered accountants are employed in his Department.

Mr. Boyd-Carpenter: One, Sir.

Mr. Hughes: Is the fact that only one chartered accountant is employed by the Government the reason why I cannot find out the cost of the military operations in the Aden Peninsula? Is the right hon. Gentleman aware that I put this question to the Minister of Defence, whose arithmetic is evidently not his strong point, and I got no reply? Surely there is one chartered accountant who can help the Government to work out the cost of what is happening around Aden?

Mr. Boyd-Carpenter: I am glad that my mathematics have been more successful than those of my right hon. Friend's Department. If we wanted more such officers we would recruit them. I hope that the hon. Gentleman will not press us to inflate establishments unnecessarily.

Sir G. Nicholson: Is it not possible that greater cross-fertilisation between administration and industry is desirable? My right hon. Friend may say that Government accounting is different from commercial accounting, but surely there is room for the one to learn from the other?

Mr. Boyd-Carpenter: In general, I wholly agree with my hon. Friend, and he may recall that I made a statement in the House a week or two ago which, I think, marked a significant advance in this respect.

Computers

Dr. Bray: asked the Chancellor of the Exchequer what provision for possible future Income Tax reforms has been made in the plans for the use of computers by the Board of Inland Revenue.

Mr. Boyd-Carpenter: No specific provision. But the hon. Member will be aware that these machines are very adaptable.

Dr. Bray: Does not the right hon. Gentleman think that it is pretty dead beat merely to computerise existing clerical procedures? Would not it be desirable to carry out a fundamental review of the many tax reforms which


have been proposed to see what flexibility could be introduced into the system?

Mr. Boyd-Carpenter: I am not sure that computers are the best method of achieving that end. These are used mainly for the great mass of P.A.Y.E. work, departmental statistics, and pay-rolling, but the Inland Revenue has a very good reputation for a progressive approach to the use of modern equipment.

Contractual Savings Scheme

Mr. Duffy: asked the Chancellor of the Exchequer what progress has been made in devising a form of contractual savings scheme in consultation with the leaders of the National Savings Movement; and when he expects to announce the initiation of a practical scheme.

Mr. Maurice Macmillan: A detailed study is in hand. Progress is being made and my right hon. Friend hopes to make an announcement in due course.

Mr. Duffy: Will the hon. Gentleman convey to his right hon. Friend the need to make a statement as early as possible? As personal savings appear to have reached a plateau, would not the hon. Gentleman agree that there is a need to expedite such a scheme? Secondly, will he say what he has in mind when he refers to a contractual savings scheme?

Mr. Macmillan: With regard to the second part of that question, I do not think that I can go any further at this moment. It is necessary to wait until we have some knowledge of the scheme. My right hon. Friend intends to make an announcement as soon as practicable, and I think that the hon. Gentleman realises that he need not ask me to persuade my right hon. Friend to take savings seriously.

£ Sterling (Value)

Mr. Small: asked the Chancellor of the Exchequer what is the value of the £ sterling measured in terms of January 1952; and what has been the decline in value in each of the last 12 years.

Mr. Maurice Macmillan: As the reply includes a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Small: Does not a cursory glance at the figures show a further deterioration since 1952 in the value of the £? What confidence can small savers have in Government securities and in postwar credits?

Mr. Macmillan: The hon. Gentleman has reinforced the point which my right hon. Friend the Chancellor and, indeed, my right hon. Friend the Prime Minister have been making constantly about the need to combat inflation. As regards small savers, if the hon. Gentleman examines the figures of the increase in savings over past years he will find that, whatever he thinks, they have a certain confidence in the future of the country under a Conservative Government.

Mr. Ross: Surely the first part of this Question involves only one figure? Can we have that figure, and thus find out how successful the Government have been in "mending the hole in the purse"?

Mr. Macmillan: The Question asked for a whole table of figures. [HON. MEMBERS: "No."] The£ was worth 14s. 6d. in May 1964, compared with 20s. in January 1952.

Dame Irene Ward: Why does not my hon. Friend state what security people have who invested in Daltons? Why does not my hon. Friend tell hon. Gentlemen opposite that?

Following is the table:
The table below shows the purchasing power of the £ sterling in each of the years 1953 to 1963 inclusive and in May 1964, taking its value as 20s. in January 1952. These estimates are based on changes in the consumer price index for calendar years adjusted by reference to the movements of the retail price index in the months at the beginning and end of the period.

s.
d.


January 1952
…
…
20
0


1953
…
…
19
2


1954
…
…
18
9


1955
…
…
18
2


1956
…
…
17
4


1957
…
…
16
10


1958
…
…
16
5


1959
…
…
16
4


1960
…
…
16
2


1961
…
…
15
9


1962
…
…
15
2


1963
…
…
15
0


May 1964
…
…
14
6

Oral Answers to Questions — FURTHER EDUCATION (DEVELOPMENT SITES)

Mr. Dalyell: asked the Prime Minister if he will require the Secretaries of State for Defence and Education and Science to prepare a co-ordinated scheme for making land in urban areas at present held for defence purposes available for the expansion of facilities in further education of the order of 50,000 students each year over five years, as recommended by the Henniker-Heaton Committee.

The Prime Minister (Sir Alec Douglas-Home): No, Sir. Further education is a responsibility of the local education authorities, and they must decide in the light of local circumstances what are the most suitable sites on which to develop.

Mr. Dalyell: Is it satisfactory that in order to meet these fairly modest proposals on day release some authorities are being obliged to hire accommodation from private developers?

The Prime Minister: We have accepted that in the next five years the number who will come on to day release will almost double. That is another 250,000. I do not think that that is very modest, but I think that the main thing is to get the accommodation, whether it is hired or built.

Oral Answers to Questions — LORD PRIVY SEAL (SPEECH)

Q.2. Mr. D. Foot: asked the Prime Minister whether the public speech delivered on 16th June in London by the Lord Privy Seal to the Foreign Press Association regarding the proposed trade deal between Vauxhall Motors and Indonesia represents the policy of Her Majesty's Government.

The Prime Minister: Yes, Sir.

Mr. Foot: Is it not a strange state of affairs that at a time when Indonesia is waging undeclared war against a Commonwealth country, and not only Malaysian but British and Gurkha troops are engaged, that a British firm, with the blessing of Her Majesty's Government, should give aid and comfort to the aggressor? Is not the right hon. Gentleman aware that in those circumstances

the distinction which the Leader of the House sought to draw between strategic and other goods is quite unreal, and a distinction which we completely jettisoned from 1939 to 1945?

The Prime Minister: The hon. and learned Gentleman is in error. First, my right hon. and learned Friend was making the point that it was wrong to stop trade except on strategic grounds. I think that that would be accepted. Secondly, there is no question of a British firm giving aid to or abetting the Indonesians. [Interruption.] If the hon. Gentleman will listen, he will hear what I have to say. There is no question in this case of credit being given because the export credit guarantee cannot, on purely economic grounds, cover business with Indonesia on a substantial scale in present circumstances.

Sir A. V. Harvey: Does not my right hon. Friend agree that this deal, if it comes off, is in a different category from the Leyland deal with Cuba, and that it would cause some consternation in this country if British vehicles could be of use to a Power which was waging war against our troops?

The Prime Minister: This could be so, but it is not so. There is no question of credit being given, and the deal could not be undertaken except on a credit basis. I agree with my hon. Friend the Member for Macclesfield (Sir A. V. Harvey) that there is no advantage that I can see in saying what one will do or will not do when one knows that for economic reasons these deals are not on.

Mr. J. Griffiths: May I ask whether, before the Government approved the deal, there was any consultation with the Prime Minister of Malaysia, and, if so, what was his view?

The Prime Minister: There is no question of the deal being approved. Surely the right hon. Gentleman has understood what I have said. There is no question of the deal being approved.

Sir P. Agnew: Would my right hon. Friend agree that it is a strange coincidence that the arguments deployed by hon. Gentlemen opposite were not used when it was a question of supplying friendly Spain with designs of our frigates?

Oral Answers to Questions — SOUTH-EAST ASIA

Mr. Warbey: asked the Prime Minister if he will now inform President Johnson that, in view of the new official United States policy of military confrontation with Communist Governments and forces in South-East Asia, the pledge which he gave to President Johnson last March to support American policy in South Vietnam is no longer valid.

Mr. Zilliacus: asked the Prime Minister, in view of the fact that British policy is involved by reason of the pledge given by him to support United States action in the area, if he will consult President Johnson on the threat of military action against the Chinese People's Republic made by the United States Government in respect of events in South-East Asia.

The Prime Minister: The pledge of support I gave in Washington was for the present United States policy of helping the Republic of Vietnam to defend its independence. I am not aware that there has been any change in this policy. President Johnson reaffirmed on 19th June that in South-East Asia the United States were
steadfast in a policy which has been followed for ten years".

Mr. Warbey: Does not the Prime Minister appreciate that the United States Government have now officially and publicly declared that they intend to seek a military solution to the problems of Vietnam and Laos, and that they are also publicly seeking to involve their N.A.T.O. allies in this military confrontation? In view of the obvious dangers of this situation to peace not only in Asia but Europe, will not the right hon. Gentleman now declare that his pledge is voided by circumstances, and that Britain is not committed to this disastrous military policy in South-East Asia, and that we will seek a political solution of the problems of Vietnam, Laos and Cambodia?

The Prime Minister: I am not aware that there has been any statement—and I am concerned with Government statements and not with rumours and statements in the Press—of alterations in United States policy. The United States are in South Vietnam at the request of the South Vietnamese Government, who

feel that they are being subverted and infiltrated by Communists from North Vietnam.

Mr. Zilliacus: Does the Prime Minister recall that on 15th February last he told the Young Conservatives that he would never surrender the right to share with the United States any decision affecting peace or war? Has he been consulted by President Johnson about threats of a show-down with China being made from Washington, or is he content to be committed without being consulted on this issue?

The Prime Minister: The hon. Member is wrong. There has been no official statement by the United States Government that I have seen about a confrontation or a military attack upon China, or anything of the kind.

Mr. P. Williams: However much hon. Members opposite may wish to jar the elbow of the Leader of the Opposition, will my right hon. Friend undertake that he will not have his elbow jarred in this matter and will continue to support friends?

Mr. Shinwell: Will the Prime Minister state, as clearly as he is capable of doing, what is the value of the support that he proposes to accord to President Johnson and the United States Government in South Vietnam? Does he mean to implement his support by sending forces out there? If so, where are they to come from? Is he aware of the possibility—indeed, the probability—that if this trouble develops in South Vietnam and extends to North Vietnam it is by no means unlikely that it will inject into the conflict there the forces of the Chinese Republic? Does not he express some concern about that probability?

The Prime Minister: The right hon. Gentleman is making all sorts of assumptions—first, that the war may spread to North Vietnam, and then further spread, beyond that, to China. No indication has been given to me, and no statement has been made by the American Government, to suggest that this is in their mind.

Mr. H. Wilson: The right hon. Gentleman will remember an exchange on this question on the first Thursday in March. Are we right in taking it—since the Question refers only to South


Vietnam and not to China—that his information is that there is no official suggestion at all on the part of the United States Government of any extension of the war into North Vietnam? Will he make it quite clear—as we asked him to make it clear in March—that we would not support any extension of the war into North Vietnam?

The Prime Minister: There has been no suggestion and no statement. I confirm the first part of the right hon. Gentleman's supplementary question. I do not think that the second part arises. If war were to extend into South-East Asia as a whole we would have to consider the matter with the American Government, but there is no reason to think that it will. If, by chance, war were to come to the SEATO area, of course the United Kingdom has engagements under the SEATO Treaty.

Oral Answers to Questions — FOREIGN SECRETARY (MOSCOW VISIT)

Mr. Emrys Hughes: asked the Prime Minister whether he will authorise the Foreign Secretary, on the occasion of his visit to Moscow, to sign a non-aggression pact with the Soviet Union.

The Prime Minister: No, Sir. We think that there are now more practical ways open to us for seeking to continue the improvement in relations with the Union of Soviet Socialist Republics.

Mr. Hughes: Does the Prime Minister recall that his predecessor was a strong supporter of the idea of a non-aggression pact with the Soviet Union? Is he aware that his predecessor is still very popular with the Soviet Union because of the remarkable speech that he made extolling the achievements of Mr. Khrushchev and Communism? Will he think over the idea of sending his predecessor, along with the Foreign Secretary—two fellow-travellers—to put this point of view before the Soviet Government?

The Prime Minister: It might be awkward if I commented on fellow-travellers. I will not be led into that. I do not think that I will adopt the hon. Member's suggestion.

Oral Answers to Questions — BRITISH GUIANA

Mr. Bottomley: asked the Prime Minister if he will discuss with Commonwealth Prime Ministers the question of British Guiana; and if he will make a statement.

The Prime Minister: As the House knows, the agenda of a Commonwealth Prime Ministers' Conference is always confidential. My right hon. Friend has made several statements on British Guiana recently, and I have nothing to add to them.

Mr. Bottomley: Is the Prime Minister aware that when my right hon. Friend the Leader of the Opposition made a proposal that it should be discussed the Foreign Secretary considered the matter sympathetically? Bearing in mind the fact that the Prime Minister of British Guiana has suggested a coalition Government, and would welcome Commonwealth co-operation, is not this a good reason for bringing the matter before the Commonwealth Prime Ministers' Conference?

The Prime Minister: As the right hon. Gentleman knows, it is a rule within the Commonwealth association that we do not discuss the internal affairs of each other's territories. On the other hand, the Commonwealth Prime Ministers' Conference always provides occasions for informal discussions, and if it is thought wise to discuss this informally we can do so.

Mr. H. Wilson: I recognise the confidential nature of the agenda of the Commonwealth Prime Ministers' Conference, but does the right hon. Gentleman recall the suggestion that we made in the foreign affairs debate, that in view of the very serious nature of affairs in British Guiana—which could go far beyond British Guiana—he should propose that a Commonwealth mission, representing, perhaps, Canada and one of two of the West Indian self-governing territories, India, and one of the West African States, should go to British Guiana with a view to trying to use its good offices to find some solution to this very difficult problem? If he cannot tell us about the Commonwealth Prime Ministers' Conference, will he say—now that he has had a week or two to think about it—what is the Government's reaction to that proposal?

The Prime Minister: It is a possible proposal, but before I have had time to consult the Commonwealth Prime Ministers I would not like to commit myself on it.

Oral Answers to Questions — HEALTH AND HYGIENE (WASHING FACILITIES)

Mr. Swingler: asked the Prime Minister if, in view of the contents of the letter addressed to him on 23rd June by the British Sanitary Pottery Manufacturers, he will request the Ministers of Labour and Health to raise standards of hygiene by issuing new regulations.

The Prime Minister: My right hon. Friend the Minister of Labour has just made regulations about washing facilities to be provided in offices, shops and railway premises after giving careful consideration to the representations received from the Council of British Sanitary Pottery Manufacturers. The Food Hygiene Regulations, 1960, which cover food shops and catering establishments, already deal with the provision of washing facilities for food handlers.

Mr. Swingler: Are not the sanitary potters right in thinking that in this matter their interests and public virtue march together? Will not the Prime Minister now respond to the very simple proposal that they make, that he should issue a directive to all departments concerned and to all public authorities to ensure that in their own actions and in the regulations they make, wash basins are expressly to be provided in lavatories? Will he do that?

The Prime Minister: It is already done. [HON. MEMBERS: "Where?"] Hon. Members ask where, and I will tell them. Under the Offices, Shops and Railway Premises Act, it is already required that washing facilities shall be provided in places conveniently accessible to persons employed. It is already a fact, under our legislation. I will consult my right hon. Friend to see whether any further action is necessary in respect of local authorities.

Mr. Milne: Is the Prime Minister aware that the Offices, Shops and Railway Premises Regulations do not apply to travelling shops, and that travelling food shops create a tremendous danger in

this respect? Will he consider this question a great deal more closely than he appears to be doing at the moment?

The Prime Minister: I do not know how one deals with a travelling wash basin, but I will certainly consider the matter.

Sir J. Duncan: Does not my right hon. Friend agree that the fact that the Food and Drugs Act and the Offices, Shops and Railway Premises Act have both been passed by a Tory Government—so that the necessary legislation to deal with the problem already exists—is a very fortunate thing?

The Prime Minister: That is so. The question of the mobile shop is being taken into account by local authorities. They are being consulted in this matter.

Mr. Prentice: Is the Prime Minister aware that it took a Conservative Government 13 years to pass legislation after the Gowers Committee had recommended it? Is he further aware that after taking the workers covered by this legislation and those covered by Factories Acts there are still millions of workers who are not covered by either piece of legislation? Is it not urgent that provision should be made for them and what has the Government to say about that?

The Prime Minister: The hon. Gentleman may put down a Question about people who are not covered by legislation.

BALLOT FOR NOTICES OF MOTIONS

Injured Industrial Workers (Vehicles)

Mr. Charles A. Howell: I beg to give notice that on Tuesday, 14th July, I shall draw attention to the need to provide for workers very seriously injured in industry the same type of vehicle as is provided for those injured while on war service, and move a Resolution.

Technical and Further Education (Facilities)

Mr. Boyden: I beg to give notice that on Tuesday, 14th July, I shall draw attention to the need to improve technical and other further education facilities, and move a Resolution.

Industry (Improved Communications and Understanding)

Sir R. Russell: On behalf of my hon. Friend the Member for Wycombe (Mr. John Hall), I beg to give notice that on Tuesday, 14th July, he will call attention to the need for improved communications and understanding in industry, and move a Resolution.

EDUCATION (No. 2)

3.32 p.m.

Mr. Ronald Bell: I beg to move,
That leave be given to bring in a Bill to make the afternoon attendance of young children at school discretionary.
May I, at the outset, make clear what I am not seeking to do. I am not seeking to change the minimum age for compulsory schooling I am not seeking to alter the present provisions for school, morning and afternoon, for those who wish it. I am seeking to relieve the position of those parents who have children aged 5 and who find that immediate compulsory attendance at school by these children morning and afternoon, for six and a half hours a day, five days a week, imposes undue strain upon them.
In this country we have the lowest starting age for compulsory education in the world. I think that only two other countries have compulsory education starting at 5—Ceylon and Paraguay. I do not want to change the starting age, but it being the case that we have the lowest compulsory education starting age in the world, I wonder why we should be so rigid and fierce in demanding immediate whole-day attendance for children of this tender age.
It was not always so. From 1870 until 1959 the matter of afternoon attendance at the starting age of 5 was left to local and personal common sense. It is not, strangely enough, a provision of any Education Act which causes the difficulty which I seek to remedy by my proposed Bill. The 1944 Act was the basic Act setting up a post-war system of education. It imposes their respective duties on parents and schools. It is a comprehensive Act. It is simple and clear in its terms. It did not set out to impose a Napoleonic code of education on the whole country, nor prescribe what a school ought to do. It is, in fact, remarkable for the extremely limited powers which it confers on the Minister of Education. The keystone of the arch is the local education authority. Everything, or almost everything, under the 1944 Act was left to the discretion of the local education authority.
Under the 1944 Act and, indeed, under the Acts which preceded it way back to


1870, neither the Minister not the local education authority can lay down what constitutes a school day It was left to discretion. Section 36 of the 1944 Act, which imposes on parents the duty of sending children to school and on local education authorities the duty to provide schools. state that
It shall be the duty of the parent of every child of compulsory school age to cause him to receive efficient full-time education suitable to his age, ability and aptitude, either by regular attendance at school or otherwise.
So far as I know, no parent of a 5-year old child has ever been prosecuted under that provision for wanting to introduce the child gently and progressively after its fifth birthday into the State system. There is no definition in that or any other Education Act of what is full-time education or regular attendance at school. That was all successfully left to common sense and local discretion. Private schools almost universally have a starting age of 5, with morning attendance only, and then, as children get familiar with the change from home to school, attendances gradually increased—afternoon attendances—until, well before the age of 6, children are attending school for a full week. Suddenly, in 1959, this sensible arrangement was replaced by the most punctilious prescription, and not under any Education Act. In 1958, we had the Local Government Act, which introduced something called the general grant, or block grant. This was commended to us at the time—I think rightly—as increasing the responsibility and discretion of local authorities. On that basis it secured the approval of this House. Under the Local Government Act of 1958 there is a default section, Section 3. The rubric to that Section states:
Power to reduce general grant in case of default.
The Section provides that
… if the appropriate Minister is satisfied that a recipient authority has failed to achieve or maintain reasonable standards on the provision of any of the services giving rise to relevant expenditure …
the grant may be withheld.
That Section does not apply particularly to education. It is a default Section dealing with the whole of local authority services. Under it any departmental

Minister may make regulations prescribing standards and general requirement" for the administration of any of the services ranking for grant expenditure.
Under that Section of the Local Government Act, 1958, the Education Regulations, 1959, were made, prescribing in exact detail what constitutes a school day and laying down by central prescription, I am sorry to say, many matters which could not be prescribed either under the 1944 Act or any other Education Act. It is from Regulation 10 of the default Regulations that we have this legal requirement that a child, on going to school for the first term after its fifth birthday, must go in the morning and afternoon for five days a week, otherwise its parents will be prosecuted.
From that time on prosecution and threats of prosecution of parents have gone on, not because local education authorities wanted to do that but because they had to do it. Otherwise, they would be in breach of the 1959 Regulations. A constituent of mine, who wrote to mo in 1961 because she had been threatened with prosecution, said:
Having had a Froebel training, and having taught in both State and private schools, I have always felt that afternoon school makes too long a day for some five-year-olds.
This was one of the reasons for her trying to get her daughter into a private school, but she was unsuccessful and the child started at the village school. She kept her at home for two or three weeks in the afternoons, but then the coercive process began. In order not to have to go to court, she gave in and sent the child to school.
About the same time these prosecutions were exciting public attention. There was a programme on television about them. A headmistress of a State primary school made the position clear as she, and as I, understand it. There is either a medical certificate from the doctor saying that the child is ill or the child must go to school. She said:
I would certainly say keep them at home for a day or two, but I could not give you permission indefinitely to do that without referring to the education authority.
I shall not give her name. She also said that she thought this was wrong.
I wrote to the Chief Education Officer for Buckinghamshire and got a very sensible answer. He said:
I find that those who plead for a gradual introduction after the age of five usually have enlightened views about education of a young child and are prepared to play their full part in the development of their children. Of course, I am bound by the law in this matter and I have no authority to approve part-time attendance at school after the age of five.
I agree with his view of the law. I think that he is quite correct, because Regulation 10 of the 1959 Regulations reads:
On every day on which school meets there shall be provided for the pupils in all schools of classes mainly for pupils under eight years of age at least three hours of secular instruction divided into two sessions one of which shall be in the morning and the other in the afternoon.
Under that Regulation neither the parent nor the head teacher, nor the local education authority nor the Minister himself, unless he lays new regulations, has any discretion in any case unless there is a medical certificate.
I raised the matter on the Adjournment but, I am sorry to say, I did not have a great deal of success. I sum up by quoting from The Times Educational Supplement:
Why is it that an efficient private school can recognise that the mornings are enough for its earliest entrants while the local authority school insists on exposing its infants to the full rigours of the live-long day? The answer lies in the rigidity of the statutory system … Anyone who has experience of private and State schools in this matter must recognise that the gentle introduction the private sector gives has much to commend it. Can we not really get down to considering whether here the independent schools have not a practice which the State schools might do well to copy?
The hon. Member for Coventry, East (Mr. Crossman), with whom I do not often have the pleasure of agreeing, has recently been the chairman of a Labour Party study group which has been going into this matter. That group has recommended, I am happy to say, what I was commending on 31st July, 1961. I must be non-partisan in this matter. I did not get a very sensible answer from my hon. Friend on the Government Front Bench on that occasion and the hon. Member for Coventry, East has had a most unfavourable and disagreeable answer from his right hon. Friends. His study group recommended:

Instead of accepting the proposal to propose entry to primary schools until 6, we would prefer to see attendance at school become compulsory for only half a day from 5 to 6, and voluntary for the other half of the day in a play centre in the school.
That is exactly what I proposed three years ago, although I put it slightly differently. I suggested that the formal instruction should be concentrated in the morning and the halma and dominoes in the afternoon. That is the practice now in a great many State schools, but attendance for halma and dominoes in the afternoon is compulsory. It will not be for long that the hon. Member for Coventry, East and I will be in agreement, so perhaps we had better make the most of it.
We are not alone in this strange alliance, for London County Council, in the evidence it gave to the Plowden Committee, which was published a few weeks ago, made almost exactly the same point. It went even further and suggested—admittedly, as a temporary measure—what I am not suggesting, that there should be mornings only for 5-year-olds and no school in the afternoon. I am proposing that school should continue in the afternoon, but that attendance should be voluntary. The L.C.C. Education Committee has said:
There is an educational case for the first term or two of schooling being part-time.
I add only these comments from others. The Chief Education Officer of Leeds described the sudden plunge into school of a 5-year-old as
a traumatic experience for most children.
The reform I am urging has been supported by articles in The Times, The Times Educational Supplement, The Guardian—repeatedly—the Daily Telegraph, the Sunday Times, the Observer, the Sunday Telegraph, the Economist and almost all the educational journals. In my area the Association for the Advancement of State Education has sent around a questionnaire. Almost half the answers from parents have indicated that they consider the school day far too long when the 5-year-old leaves home and starts school.
I shall not be told today, but I may be told some other time, that there is a committee sitting on this question. There is, but my experience has been that there is nearly always a committee sitting.


There was not a committee sitting when I raised the matter in 1961 and I did not get any further. Now there is a committee sitting, and probably when I next raise the matter there will not be a committee sitting. This change could be made without legislation. It could be done by changing the Regulations. I have not been able to bring about a change in the Regulations by persuasion, so I seek to bring in legislation now to compel it.
In the Long Title to the Bill I use the ambiguous word "discretionary" because I do not mind whether this matter is solved by giving discretion to the parent, to the head teacher or to the local education authority. I would not mind any of those solutions. But if I were given leave to introduce the Bill I should propose that discretion should be given to the parent. What I think is absurd is that no one near the child should have any discretion. If all three agree—the local education authority, the headmistress and the parent—still the wretched child must go to school in the afternoon for five days a week. For these reasons, I beg to ask leave to present the Bill.

Question put and agreed to.

Bill to be brought in by Mr. Ronald Bell, Mr. F. M. Bennett, Mr. William Clark, Mr. Godman Irvine, Mr. Goodhew, Mr. John Hall, Mr. Kershaw, Mr. Kitson, Mr. Graham Page, and Sir Ronald Russell.

EDUCATION (NO. 2)

Bill to make the afternoon attendance of young children at school discretionary, presented accordingly and read the First time: to be read a Second time on Friday, 10th July, and to be printed. [Bill 175.]

Orders of the Day — FINANCE BILL

As amended, considered.

New Clause No. 7.—(RELIEF FOR PERSONS OVER SIXTY-FIVE WITH SMALL INCOMES.)

In section 13 of the Finance Act 1957 (relief for persons ever sixty-five with small incomes), as amended by section 8(2) of the Finance Act 1962 and section 12(7) of the Finance Act 1963, for the references to £325 and to £520 (the income limits for exemption) there shall be substituted references to £360 and to £575; and (as regards the marginal relief) for the reference to £75 (the addition to the income limit) there shall be substituted a reference to £130.—[Mr. Maudling.]

Brought up, and read the First time.

3.52 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling): I beg to move, That the Clause be read a Second time.

Mr. Speaker: I think that it might be convenient for the House to discuss, at the same time, new Clause 6—Income Tax: increase of small income relief—and new Clause 9—Increase of personal relief for certain householders over 50 years of age.
I should call either or both of the other new Clauses for a Division if that were desired.

Mr. Maudling: The purpose of the new Clause is to increase the limit of income at which age exemption can be claimed. The House will be familiar with this feature of our Income Tax code, which is of fairly long standing and which provides that where a single taxpayer has reached the age of 65, or where, in the case of a married couple, one of them has reached the age of 65, exemption from Income Tax is given if their income, be it single or joint, does not exceed a certain sum. The existing sums are £325 a year for a single taxpayer and £520 for a married couple.
The Clause increases those limits to £360 in the case of a single person and to £575 in the case of a married couple. The new Clause further makes provision for an addition to the range of marginal relief, in this case extending it from £75 to £130. The cost of these provisions would be £1¾ million in the


current financial year and £3 million in a full year. The effect of the Clause, as we calculate it, would be to exempt from taxation about 120,000 taxpayers, and a further 185,000 taxpayers will benefit from the marginal reliefs to which I have referred.
The amount of gain for the individual taxpayer in the case of exemption from tax will become greater as his income approaches the maximum at which exemption will be granted. The nearer to the limit, the more he benefits. The maximum benefit in the case of a single person will be £15 15s. and in the case of a married couple £24 15s., at the point where their income is the equivalent of the new limit which the Clause prescribes.
In the case of marginal reliefs the amount by which people benefit will vary with individual circumstances, but it will be possible for people to benefit under the new provisions to some extent by marginal relief with an income of £424 a year for a single person and £704 a year for a married couple
That, briefly, is the purpose of the Clause. As far as administration is concerned, the Inland Revenue will review the field and pick up the cases of people who will benefit and automatically adjust their P.A.Y.E. coding. Taxpayers should receive notices of their new coding shortly after the Finance Bill becomes law, and they will receive any necessary repayment by means of coding adjustments immediately or shortly after that.
I would ask people who benefit not to write to their tax offices, because automatically the benefits will be applied through the machinery of the Inland Revenue, and after the distribution of notices of revised coding the Revenue will also insert notices in the local Press, in case any people have been overlooked, advising them that if they have not received new coding notices they should apply to their tax office. This form of administration has proved satisfactory in the past and it will enable this benefit to elderly taxpayers to become effective as rapidly as possible.
During the Committee stage there were discussions on this and similar proposals for tax reliefs. As my hon. Friend the Financial Secretary said at

the time, I wanted to consider whether any changes could be made in this field this year. Before making up my mind I wanted to consider the discussions in Committee and the views put forward by both sides of the Committee. Looking at that discussion and at the current level of the age exemption provisions, it seemed to me that there was a case this year for making the changes which I have just outlined.
On both sides of the Committee we always wish to make improvements in this relief, but the limit is normally set by its relation to other tax reliefs, given to other taxpayers, including married couples. The figure which I have chosen of £575 for a married couple will be just slightly below the figure available to a married couple with one young child where the income is wholly earned.
I think, therefore, that the provision which I am suggesting in the new Clause keeps the tax code on personal allowances logical and consistent and retains a fair balance between various taxpayers. It will, at the same time, provide a very welcome easement to people who, as taxpayers, command the sympathy of both sides of the House. Those are the reasons for which I move the Clause, and these are the provisions which I propose for carrying them into effect.

Mr. Douglas Houghton: The House warmly welcomes the proposals which the Chancellor has made to improve the conditions of age exemption. The right hon. Gentleman has noticed that since he put the new Clause down he has received strong reinforcement from this side of the House.

Mr. Gordon Walker: In case he changed his mind.

Mr. Houghton: We gladly withdrew our new Clause, which we had discussed in Committee and which we were anxious to discuss again, to give the Chancellor an opportunity to say what his intentions were.
Frankly, it surprised me that he had delayed doing this until this late hour of our deliberations on the Bill He has given a rather lame excuse why he was prepared to do nothing earlier and why he has delayed action until now. He said that he was anxious to hear the views


of both sides of the House and to inform his mind on whether this year he should carry the age exemptions still further.
But when I moved the new Clause to improve the age exemption in Committee on 9th June, the Financial Secretary, in in reply to the debate, presumably without conveying anything to his right hon. Friend, said:
… my right hon. Friend is considering the question whether the differential is wide enough in this year. I cannot and shall not anticipate his decision, but there is one point that I should like to make …"—[OFFICIAL REPORT, 9th June, 1964; Vol. 117, c. 357.]
But if the Chancellor was delaying consideration until he had heard the views of both sides, why was he considering the question before he had heard any remarks at all? It seems a very strange situation for the Chancellor to be in.
4.0 p.m.
The proposal has now come from the Chancellor and a number of old people whose incomes would have been taxable again this year will have the advantage of a reduction or the extinction of the tax which they would have had to pay. Happily, the Chancellor has gone further this time than on previous occasions in improving this relief. In the new Clause which we put down in Committee, we followed the amounts by which age exemption had been improved on earlier occasions, which, we thought, would be the most we could persuade the Chancellor to accept when he himself had not made any proposal whatever. I raised this matter first in a speech on the Budget Resolutions. On 20th April last, I stressed that, in the view of my right hon. and hon. Friends, a further improvement of age exemption should appear in the Finance Bill. The Chancellor made no response to that, and there was nothing in the Bill when it was introduced. At the last stages of the Bill, however, we have his new Clause before us.
There is no doubt that the new amounts will widen the disparity between younger people and old people in the level of taxation, a point I referred to when I introduced our new Clause in Committee. We should not disguise the advantage which older people will have under the age exemption, but what we should say is that it is justified and will be acceptable to those who pay tax in the

normal way. According to my figures, a younger married couple without young children will pay about £20 tax at the point at which older people will be completely exempt, and a single person under 65 will be paying about £11 10s. a year tax at the point when the single person over 65 will be completely exempt.
This disparity is justified on the ground that older people, generally speaking, suffer a reduction of income at this point in their lives and any taxation on an income already slashed by retirement is felt as a very heavy burden. Younger people, on the other hand, are generally on rising incomes and they are not in the position of those who have retired on half or less than half pay supplemented as may be by resources of their own.
On this side, we welcome the Chancellor's proposal and we welcome, also, the fact that he has broken away from the pattern of previous adjustments, which hitherto have never been more than £25 for a single person and £40 for a married couple. The improvement is now to be £35 for a single person and £55 for a married couple.
New Clause No. 6 is, to some extent, a stable companion of the age exemption and age relief provisions. We propose that a further advance in small income relief should be made this year. As the House knows, the small income relief does not provide any exemption limit similar to the age exemption. All it does is to extend the two-ninths relief to investment income of persons of any age whose total incomes are within the limit prescribed as "small", so that it gives, virtually, earned income relief on unearned income. At present, the limit of the concession is a total income of £450 a year, and we propose that it should be raised to £500.
The small income relief has never kept absolutely in step with changes made in comparable reliefs, still less with the age exemption. There have been differences in the pattern of change over the years, sometimes one standing still longer than another. Lest year, however, the Chancellor improved the small income relief limit from £400 to £450 at a time when he improved the age exemption and age relief. In our view, the problem of people with small incomes should be further relieved this year.
In terms of revenue, it is a very small matter. On the human side, however, it is most important to a number of people. Many of the people who are concerned with small income relief are widows, spinsters and others living on annuities, on the proceeds of legacies, and so forth. They are people who, for various reasons, are unable to take employment or can do so only to a small extent. They may be invalids or semi-invalids, people with disabilities of one kind or another. One has in mind also the woman who has kept house for an aged relative and who, on the eventual death of the relative, has been unable to enter any suitable employment, though being provided for on a modest scale by a legacy from the deceased relative.
We hope that the Chancellor will, even now, sympathetically consider an improvement of the income limit for small income relief. The improvement of £50 which we propose is small enough, and I emphasise again that the effect in terms of revenue must be small.
New Clause No. 9, in its present form, is a newcomer although it has appeared on the Notice Paper in a different form in years past. It raises a matter upon which I myself have felt quite keenly for quite a time. Some years ago, I persuaded the Trades Union Congress to include a proposal on these lines in its evidence to the Royal Commission on the Taxation of Profits and Income.
It proposes to distinguish between one single person and another in order to grant a higher personal allowance to the single person who is a householder—that is, an occupier of unfurnished accommodation or a tenant of furnished accommodation. By "single person," I mean any person to whom the single person's allowance applies. That covers widows, widowers, separated spouses who are assessed as single persons, divorced persons who are assessed as single persons—everyone who receives the single person's present allowance of £200 under the Income Tax code. This provision would apply to those who are householders or are tenants of furnished accommodation, subject to a stipulation of age, and the age of 50 is mentioned.
This Clause is an attempt to meet the special grievance of many people of mature years, both men and women,

occupiers of unfurnished accommodation, householders maintaining a house in which they have probably lived all their lives—the parental home, may be—who feel that it is very wrong that the taxation system applies to them only the same personal allowance that it gives to younger people with smaller responsibilities, and who are relatively better off on the same amount of money because of their smaller commitments in life.
I do not pretend that this is a scientific way of dealing with the matter, and I know that I have some very powerful opinions against me on the general question of the place that personal allowances should occupy in a progressive system of taxation, but I must voice the grievance expressed to me over the years by many hundreds of people who feel that the present system is wrong in not providing for some differential between themselves and those who have lesser responsibilities.
The typical case one gets is that of the married man who, unhappily, loses his wife. He looks round the house—a lonely man, but with the same commitments as before—and says, "Now I am classified as a single man. Surely, that is not an adjustment of the burden of taxation to ability to pay?"
I know what the Royal Commission said on this question in its second Report—I have read it again and again. And I clearly understand that it is for the convenience of the administration to have a few simple personal allowances that can be easily applied to those who may receive them, but we have to bear in mind that in these matters we are applying the fundamental principle of any system of direct taxation, which is to attempt to adjust the burden to the shoulders that have to bear it. Although we cannot carry refinement too far, I believe that the existing system of personal allowances has many crudities about it which operate unfairly in a large number of individual cases. New Clause No. 9 is an attempt to deal with that position.
I recall that in the past objections to a proposal on these lines have been made on the ground of difficulty of administration. It has been asked, "Who is the occupier of an unfurnished accommodation?" "What is it?" "When is a


person a tenant of furnished accommodation?" "How does one define it?" Due to the diligence of my hon. and learned friend the Member for Kettering (Mr. Mitchison), the new Clause contains cross references to provide the basis of definition of the status to qualify for this additional relief.
4.15 p.m.
The age point is comparatively simple. The additional relief proposed would be to give one half of the difference between the single person's allowance and the married man's personal allowance to taxpayers who qualify for the additional relief in this Clause. At the present time, the single person's allowance is £200 and the married man's personal allowance is £320. The additional relief would be one-half of the difference between those two amounts.
I hope that the House is now fully seized of the purpose of the new Clause; and that hon. Members will observe its moderation, and its attempt to solve a very real problem in the lives of many people. We cannot be satisfied with our system of direct taxation unles we are continually adjusting it within the scope of practical administration to meet circumstances in everyday life that we clearly realise, and which do excite the sympathy of all of us who come up against these individual cases in our constituency and other experience.
I leave the matter there. Because of the way it is put to the House I cannot formally move either of my new Clauses, but I trust that the House will mix with its congratulations to the Chancellor some concern with two sets of people whom the two proposed new Clauses would cover.

Dame Irene Ward: I have not the slightest idea how the Chancellor of the Exchequer has suddenly come forward with these new proposals. I only know that I am delighted that he has, and when I am delighted I do not try to penetrate very much further—I think that it is a waste of time. I have tried for years to find out how the brains of various Chancellors have worked, and that is hard work, because one never really arrives at a satisfactory conclusion. I only know that this particular concession is very welcome.
The whole idea of a special age relief for those on small fixed incomes started with my right hon. Friend who is now the Minister of Defence. I do not know that it has been recorded in the House, so I must say that he was at one time chairman of the Tory Reform Committee. I can tell my right hon. Friend the Chancellor—who, of course, was too young to be a member of that committee—that it made some very valuable suggestions which almost revolutionised the Tory Party. He should, therefore, always listen to those who were members of the Committee, as it has been very valuable to the Tory Party in the past.
I never like to forget old friends, so I am always delighted to say that the present Minister of Defence was really the first Chancellor who ever departed from the advice given by all those very distinguished and marvellous civil servants—who advise, but who live in a world of their own. It is a great thing to have a. Chancellor who does not always listen to them on matters like this.
I accept that in regard to the big overall matters the Chancellor and the civil servants have a duty to perform to the country, but in little matters like this—because it is a little matter, though very worthy—the Chancellor ought to listen to the backbenchers, who really know a great deal more about it than distinguished Chancellors or civil servants. I am delighted that my right hon. Friend has taken this line.
I have listened with great interest to what the hon. Member for Sowerby (Mr. Houghton) said about new Clause No. 6. I entirely agree with him. Neither the Opposition, when they were in power, nor the Tory Party, have ever concerned themselves about the small man and the small woman, because they have always: been so concerned with such matters as the overall balance of payments, which is very important. I am not one of those who think that they are not tremendously important. However, we want to do justice. I say with deep humility that those who are referred to in the hon. Gentleman's new Clause have never had the interest of Chancellors whether they have been Tory Chancellors or Labour Chancellors.
I suspect that the power behind this move, which, I hope, will be extended,


is the new Prime Minister. I have never come across a Prime Minister who has been as easy to talk to and as understanding to talk to as the present Prime Minister. I am delighted that he is the Prime Minister, because I look forward to influencing a great deal in the future.
There is a great deal in all these matters which requires examination. My right hon. Friend the Member for Thirsk and Malton (Mr. Turton) played a large part when we made our speeches on this matter in Committee. I do not expect that the Chancellor will make another move forward and accept the new Clause of the hon. Member for Sowerby. However, my right hon. Friend the Chancellor should carefully consider what the hon. Member for Sowerby said, because, even though the hon. Gentleman belongs to the Opposition, he knows a good deal about all these things and has been a great help in bringing forward the rather small detailed matters which escape the Treasury's attention. I should like to thank the hon. Gentleman, because on many things he and I have co-operated. It is a pity that our co-operation has not had a greater effect on Chancellors.
I am no mathematician. I find it difficult to understand all these details, but I am grateful for the move which has been made today. I should have been much more pleased if my right hon. Friend had explained marginal relief a little more fully. I am not certain whether everyone has been uplifted to marginal relief or how this substantial extension will work. My right hon. Friend always assumes that everybody in the House knows exactly what it all means, but I say frankly that I do not know what it all means. I want to be assured that both men and women benefit and that we are something fairly helpful to those living on small fixed incomes.
It has taken a long time to get the House to be aware of small fixed incomes. I am delighted that we are moving into the era of studying the problems of those on small fixed incomes. There is a great deal about them that needs readjusting. I am sure that my right hon. Friend would like to rise and say that the cost of living has been held steady. I accept that it has been, up to a point, but it has not been kept steady in the things that matter to those on small fixed incomes.
I wish that my right hon. Friend would not say so much about washing machines and television sets. I wish he would talk about coal, gas and electricity, which are much more important to those on small fixed incomes. They will benefit from the reliefs in the new Clause. I could make a much better statement about small fixed incomes and the expenses their recipients have to meet than my right hon. Friend could by talking about washing machines, television sets and motor cars. I know that those things are very important, but they are important to those who can pay for them.
Those on small fixed incomes, who are affected by the Clause, must find more money for the increased cost of gas, coal, electricity, transport, rates and rents. I should like to see all those things taken out and the small fixed income problem related to them. It is possible to economise on certain things, but not on those things. It is very misleading to those on small fixed incomes when the Tory Party gets blown up, even though we have done so well, by saying that it has kept the cost of living steady. We have done so for those who have had increases in wages and salaries. We have not kept the cost of living steady for those living on small fixed incomes. I want my right hon. Friend to address himself to this point, which I regard as the most important thing in the Finance Bill at the moment, as we have got rid of all the other great things which affect the country.
I am always very happy when something is done. It takes a good deal of hard work to get action, but we have got action today. I thought that my hon. Friend the Financial Secretary did this very nicely in Committee. He is a very good speaker. He was followed today by the Chancellor. We still do not quite know how much has happened, but I hope that the House together—because this is very important—will get moving on small fixed incomes. I am glad that we have a Tory Chancellor, because, when we Tories say that we will do something we provide the money to meet the concessions, and that is equally important as making the concessions. I thank my right hon. Friend the Chancellor very much. I hope that he will go from strength to strength and do everything he can for


those in whom so many of us are desperately interested.

Mr. W. A. Wilkins: I am not concerned about the committee to which the hon. Lady the Member for Tynemouth (Dame Irene Ward) referred, whose job it is, or was, to reform the Tory Party. I am sorry for that committee, because I imagine that it has a rather difficult task on hand. I have risen to address myself to the new Clause No. 9. No one on this side of the House would desire to detract in any way from the interest of the hon. Lady in the difficulties and needs of people who have been trying to exist on small fixed incomes. We welcome her support for the principle we seek to enunciate in our new Clause.
With all possible respect to my hon. Friend the Member for Sowerby (Mr. Houghton), I can claim to be the first back-bench Member to raise the specific case to which my hon. Friend referred. Five or six years ago I called the attention of the House to what I thought was an anomaly in the treatment for Income Tax purposes of the widower. I shall not weary the House with the details of the case I then cited. They are on record in HANSARD. Perhaps one reason why we have failed in our responsibilities to those people, both as a Government and back bench Members, is that it is only when one is brought face to face with the circumstances by someone who is obviously suffering under these difficulties that one realises that they exist.
The case I have in mind is that of the widower. I have in mind, more particularly, someone whose case was brought to my attention. He had not been married very long before his wife became physically incapacitated. She endeavoured to do some of her work in the home. She had to go to hospital on many occasions. Eventually, she died. The home has to continue. The house is on mortgage. There are two children, one aged 14, who must be looked after. The widower must continue with his employment. He is faced with the difficulty of trying to run the home, keeping the home clean by some means or other, and meeting all the expenses of the home, which are precisely the same now as they were when his wife was alive.
This widower can obtain no relief whatever. He is treated for tax purposes as a single man. When this widower

went to the Revenue to ask whether there was any means by which he could be relieved of his tax responsibilities as a single man, and be taxed as a married man, he was told, "No, although you can go into lodgings, or, if you wish, stay where you are and employ a home help".
4.30 p.m.
It is worth noting that if he employs a woman as a housekeeper he can obtain tax relief, but no hon. Member will want me to explain why there are sometimes reasons for people not wanting to accept the help of a housekeeper as such. There are often valid reasons why a widower might not wish to employ a woman in this way, but prefer to have someone come in to look after the house on a day-to-day basis, in which case the widower gets no relief for the money paid to such an employee.
I do not want to argue this case at length. I explained it in detail to the House six or seven years ago, when I pointed to it as one of the hardest cases that had come to my knowledge since becoming a Member of Parliament. I recall telling the House that despite the tremendous physical disabilities suffered by this man's wife before she died, this man had fulfilled in every way his marital vows. He had cared for her to the best of his ability, had looked after her well-being and their home. He was a man of character—yet the moment he found himself a widower he was in difficulties about maintaining his home.
I need only add that the financial commitments of a widower are equal, often greater than, those when his wife is alive. From the time of her death he must employ someone to carry out the normal household work. I hope that, having aired this matter briefly again, the Chancellor will consider people who find themselves in this position and will again consider the suggestions made by my hon. Friend the Member for Sowerby and at some future date offer relief to the sort of case I have described. I appreciate the administrative difficulties in giving relief in this sort of case, but I do not believe that they would be insuperable.

Mr. R. H. Turton: I thought the hon. Gentleman the Member for Sowerby (Mr.


Houghton) a little ungenerous in his criticism of the method my right hon. Friend the Chancellor has used to discuss this subject. It is important that the Committee stage of a Finance Bill should be used to suggest improvements to the tax provisions. Many of us have for years felt strongly on this question of tax relief for the old and I thought that my right hon. Friend was wise in leaving it for hon. Members on both sides to air their views on whether there should be improvements again this year.
We have gained a great deal by this provision, because the new Clause is a good deal more generous than that suggested in Committee by the hon. Member for Sowerby. I do not make any point in saying that we have now gained for the old people a good deal, particularly in marginal relief. The Clause put forward in Committee by the hon. Member for Sowerby did not mention marginal relief. I congratulate my right hon. Friend on the step he has taken in extending marginal relief from £75 to £130, because that means that the band of help has been extended considerably.
I hope that the Chancellor will not feel inhibited by what he has done in this and previous years. I hope that he will go further in his next Budget, if there has been any change in the intervening time; in other words, if there is a rise in the cost of living then that should be reason enough for him putting these age limits higher. Equally, if we get a 4 per cent. growth rate, that will be a good reason for the age exemption limits being raised.
What is extremely annoying for older people is that they should get increases in their pensions and then find, because of those increases, that they are brought within the sphere of Income Tax which they were not previously paying. This is the great widom of the present move, in conjunction with the Pensions (Increase) Act of last year, by which increases are provided to enable old people to pay less tax than before and have a higher income left.
The other Clauses we are discussing about age exemption limits are important. There is a good deal to be said for trying to help those in the small income groups, but I suggest that new Clause No. 9 would be extremely

difficult to administer. I am sure that the hon. Member for Sowerby will agree that while there are hard cases, such as that described by the hon. Member for Bristol, South (Mr. Wilkins)—cases which excite our sympathy—to try to define "occupies furnished accommodation" and similar phrases might result in relief being given not necessarily to only hard cases. But I agree that this matter should be looked at again in an effort to find a fairer way of dealing with what is undoubtedly a difficult problem which some widowers must face.

The Financial Secretary to the Treasury (Mr. Alan Green): We have had a relatively short debate on these three new Clauses, but the points involved were made with clarity and were so thoroughly discussed in Committee—apart from Clause No. 9, to which I shall refer—that I believe the House is now seized of the real considerations in each case.
I would like to say first, on behalf of my right hon. Friend, how much he has appreciated the reception given to his proposals on age exemption. I hope that I can reassure my hon. Friend the Member for Tynemouth (Dame Irene Ward) and my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) that my right hon. Friend's proposals show that personal allowances are in a real sense considered year by year. I am sure that this is the right way to proceed; that they should be considered in the circumstances and context of each year. It is, therefore, proper that on this occasion my right hon. Friend should have listened and considered with care—added to his own consideration—the considerations advanced on both sides in Committee.
We had a fairly full discussion of new Clause No. 6 in Committee and I am sure that the hon. Member for Sowerby (Mr. Houghton) will not mind my saying that I did not think that he added in any way today to the arguments he advanced in favour of this proposition in Committee.

Mr. Houghton: One cannot go on adding to a glimpse of the obvious.

Mr. Green: In that case, perhaps the hon. Member will glimpse the obvious from this side of the House. It would be a welcome thing if he did, if he does not mind my saying so.
The hon. Gentleman made some attempt to link this with age exemption. I did not notice him try to push very hard the argument that every time one improves the age exemption limit one is automatically bound to improve this particular limit. Perhaps he was being wise, because although over a period of years the limits have moved more or less together, a degree of difference in the relationship has been kept between them. It would be difficult to make any automatic link between these two forms of relief. Indeed, small income relief, which is what we are talking about, was substantially improved in 1962 and 1963. The hon. Member for Sowerby is quite right in saying that the cost of new Clause No. 6 would be small. I have had the figures checked again and on the latest findings that I can give him it would cost about £500,000 in a full year and benefit about 100,000 people.
The reasons which I gave him for not accepting this proposal this year must remain valid. In any year changes in these allowances must be a matter of priority, and I am sure that he would agree that this must always apply. There are always priorities to be observed in any one year. Sometimes the Chancellor has nothing at all to give away, in which case the priority is to give nothing away, quite literally, in the interest of the whole economy. In other years, he can give something and it is a matter of priority where to give it.
The difficulty about this proposal is that, although the cost is small, a very high percentage of the benefit would not, in fact, go to those who are living wholly on small fixed investment incomes. A substantial number of young people, part of whose income is invested income, would benefit and this, I am sure, is not the result that my hon. Friend the Member for Tynemouth would desire. It would be benefiting the elastic income, so to speak, to quite a substantial extent.
The intention, certainly on this side of the House, is to give assistance, where possible, to the inelastic income of those who cannot adjust their incomes upwards when prices rise or when, as my right hon. Friend the Member for Thirsk and Malton said, the general standard of

living in the country rises and they are not able to go up with it. I called this a capricious result in Committee, and it is because of this my right hon. Friend has not felt able to afford any priority to this relief this year. I cannot, therefore, advise the House to accept the new Clause.
I come to new Clause No. 9. Here it was very fairly said by both hon. Members opposite who spoke about it that this was not a scientifically based proposition. That would be near about the words which the hon. Member for Sowerby used. Of course, it is not. He went on to argue that this fact should not prevent a relief of this kind being given because it would undoubtedly give some help to a number of people who are hard cases and to whom particular misfortunes occur in the course of their lives, as for example, that given by the hon. Member for Bristol, South (Mr. Wilkins).
Again, the hon. Gentleman was perfectly fair. He said that the Royal Commission was against it, and it most certainly was, on the ground that it is very much better to try to keep to simple, readily definable classes of allowance. Once one gets away from that, one enters the whole jungle of anomalies, disparities and difficulties and probably injustices between one taxpayer and another, which, again, my right hon. Friend the Member for Thirsk and Malton suggested would be the case.
There does not seem to be, when one thinks about it, a real reason for putting a single person who is past the prescribed age, in this case 50, and who occupies a house or a flat, in a better position for Income Tax purposes than the younger single person who is a householder or a single person, of whatever age, who lives in an hotel or in lodgings.
4.45 p.m.
It is precisely such a breaching of equity in the principle of tax law that would follow if this kind of proposal were adopted. That is not to say that hon. Members on both sides of the House do not have the very greatest sympathy indeed with the hard cases that can be found, and, unfortunately, are found, such as those which have been quoted It is extremely rough for the man whose wife dies. This, of course, in itself is a far bigger misfortune than the Income


Tax consequences that follow, and for which there is no foreseeable compensation in Income Tax terms which could be of any real help. He feels it particularly because his allowance is reduced to that of a single man.
But it has to be remembered that he got the higher marriage allowance in the first place not because he was a householder, but because it was for two persons, himself and his wife. That is what really gave them the higher marriage allowance. It is the only conceivable ground on which he could receive it. I agree that it is very bad luck when he reverts to the single person's allowance, but if he did not do so, all other single persons would instantly have a grievance, and it would be extremely difficult to resist the grievances which they would be bound to voice. I am, therefore, afraid that on the ground of principle I cannot advise the House to accept the new Clause No. 9. It goes flat against the present cannons of tax law, as I think the hon. Member for Sowerby would agree. He said that there was no reason why we should not change them from time to time. I agree about that, but a change in this case, we are quite certain, would create more anomalies, difficulties and injustices than it would remedy.
The second ground that I must give for refusing it this year is that although we have no precise estimate of the cost and it would be very difficult to estimate, it would certainly run into tens of millions of pounds. This would disrupt seriously the difficult matter of keeping this year's Budget in balance and, therefore, it is with regret that I must advise the House against accepting the Clause.

Mr. John Diamond: We have discussed two of these proposals in Committee as well as today and I am sure that the House will forgive me if I deal with them very shortly. Concerning new Clause No. 7, we all wish, as the hon. Lady the Member for Tyne-mouth (Dame Irene Ward) expressed in such charming sentiments, to thank the Chancellor for the decision that he finally has made. I could perhaps go into it a little more and say that I was impressed by the main argument which the Chancellor used in favour of this step and which is, of course, that he said that it would keep the tax code logical and consistent,

or, as I would say, keep the various personal allowances in some reasonable relationship or parity one with the other.
But this argument, being a permanent argument, can have nothing whatever to do with the bringing forward of this new Clause. One felt, as the hon. Lady felt, that the question which remains to be answered, and which no one attempted to answer, is why the Chancellor did not bring it forward earlier—why did he leave it to the last minute? It would be a very brave man indeed who would attempt to offer to the hon. Lady any guidance on a political matter of any kind, because the hon. Lady is so experienced in these matters, but I have been brought up to believe that in politics it matters not so much what one does as when one does it.
Perhaps, therefore, if one looked around very carefully, one might find an occasion that either has presented itself, or is likely to present itself in the near future, which might give us some guidance why the Chancellor is bringing this Clause forward at this last minute when the reasons for it have been obvious the whole time and which were very relevant in Committee, and indeed, in the Budget itself. Perhaps we can leave it at that and say to you, Mr. Deputy-Speaker, that as we have added our names to the new Clause we would wish, when the Question is put, to voice our support strongly in favour of it.
I turn now to new Clause No. 6, entitled "Income Tax: increase of small income relief." This is a very small item in terms of the Budget—a matter of £500,000. Such a sum would help 100,000 people. I should have thought that that was not a very expensive way of helping a large class of people whom we would wish to help. The argument of the Financial Secretary that by adopting this new Clause we should also help some people whom we did not necessarily wish to help is not very powerful.
It arises in many allowances and in many parts of the Income Tax structure. It has affected this allowance throughout its history. It has virtually always been the case, except when other personal allowances have been in a particular relationship to it, that it has helped those whom we wanted to help and, to a certain and variable extent, those whom we did


not want to help as much. Therefore, I cannot regard that argument as very strong.
I am still of the opinion that this is a new Clause which could well have been accepted. The arguments for it have been made time and again. They are very sound arguments. The cost would be small and the number of people affected would be large. Therefore, when you put the Question on that new Clause, Mr. Deputy-Speaker, we shall wish to divide the House.
Finally, I deal with the last new Clause, which is a new idea. We are aware, of course, that the Royal Commission reported against this proposal, but we are helped by the fact that it stated clearly what its arguments were. It rested its case almost exclusively on administrative grounds. That is a very good guide and help to us, but it does not determine our attitude in this place completely. There are other matters, such as matters of human sympathy and hardship. No one who listened to the speech of my hon. Friend the Member for Bristol, South (Mr. Wilkins) could have failed to be affected by the sincerity of his approach and the knowledge that here was a case, one of many—we can all think of similar cases—which called precisely for this kind of treatment and help.
With deference, the Financial Secretary did not take the matter a great deal further by saying that there would be difficulty and inconsistency if a married man, on losing his wife and becoming a widower, were not treated immediately as a single person. He is right in saying that a single person, when he marries, gets the allowance as a married man for having to support his wife. But the thing which normally goes with that is an establishment. The couple do not normally continue to live separately. When a married man loses his wife he is compelled to continue to keep his house for the time being and sometimes for a considerable time. In the case envisaged by my hon. Friend the Member for Bristol, South, that situation is likely to go on for some considerable time.
That is why the new Clause is drawn in this form. The physical facts continue as they were during the marriage. The expenses involved are the same.

The expenses are appropriate to a married establishment and not a single establishment. It is for these reasons that we think that there is a solid case in favour of the new Clause, and we shall seek to divide the House on it when you put the Question, Mr. Deputy-Speaker.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause No. 11.—(DISTRIBUTION OF ASSETS OF BODY CORPORATE CARRYING ON MUTUAL BUSINESS.)

(1) Where in the year 1964–65 or any subsequent year of assessment any person receives any money or money's worth—
(a) forming part of the assets of a body corporate, other than assets representing capital, or
(b) forming part of the consideration for the transfer of the assets of a body corporate, other than assets representing capital, as part of a scheme of amalgamation or reconstruction which involves the winding up of the body corporate, or
(c) consisting of the consideration for a transfer or surrender of a right to receive anything falling under paragraph (a) or (b) above, being a receipt not giving rise to any charge to income tax on the recipient apart from this section,
and the body corporate has at any time carried on a trade which consists of or includes the conducting of any mutual business (whether confined to members of the body corporate or not), and is being or has been wound up or dissolved, the provisions of this section shall apply to the receipt.

(2) If a transfer or surrender of a right under subsection (1)(c) of this section is not at arm's length, the person making the transfer or surrender shall, for the purposes of this section, be deemed then to have received consideration equal to the value of the right.

(3) If in respect of a payment of any amount made to the body corporate for the purposes of its mutual business any deduction has been allowed for the purposes of income tax in computing the profits or gains or losses of a trade, then—
(a) if at the time of the receipt the recipient is the person, or one of the persons, carrying on that trade, the amount or value of the receipt shall be treated for the purposes of income tax (and for the purposes of the profits tax) as a trading receipt of that trade, and
(b) if at the time of the receipt the recipient is not the person, or one of the persons, carrying on that trade, but was the person, or one of the persons, carrying on that trade when any payment was made to the body corporate for the purposes of


its mutual business in respect of which a deduction was allowed for the purposes of income tax in computing the profits or gains or lossess of the trade, the recipient shall, subject to the provisions of subsection (5) of this section, be charged under Case VI of Schedule D for the year of assessment in which the receipt falls on an amount equal to the amount or value of the receipt

Paragraph (a) of this subsection applies notwithstanding that, as a result of a change in the persons carrying on the trade, the profits or gains are under section 19(1) of the Finance Act 1953, determined as if it had been permanently discontinued and a new trade set up and commenced.

(4) Where an individual is chargeable to tax by virtue of subsection (3)(b) of this section and the profits or gains of the trade there mentioned fell to be treated as earned income for the purposes of the Income Tax Act 1952, the sums in respect of which he is so chargeable shall also be treated for those purposes as earned income.

(5) If the trade mentioned in subsection (3)(b) of this section was permanently discontinued before the time of the receipt, then in computing the charge to tax under the said subsection (3)(b) there shall be deducted from the amount or value of the receipt—
(a) any loss, expense or debit (not being a loss, expense or debit arising directly or indirectly from the discontinuance itself) which, if the trade had not been discontinued, would have been deducted in computing for tax purposes the profits or gains or losses of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits as so computed, and
(b) any allowance under Part X or Part XI of the Income Tax Act 1952 to which the person who carried on the trade was entitled immediately before the discontinuance and to which effect has not been given by way of relief before discontinuance.

Relief shall not be given under this subsection or under section 32(4) of the Finance Act 1960 (receipts accruing after discontinuance of trade) in respect of any loss, expense, debit or allowance if and so far as it has been so given by reference to another charge to tax under this section or the said section 32.

(6) For the purposes of subsection (1) of this section assets representing capital consist of—
(a) assets representing any loan or other capital subscribed, including income derived from any investment of any part of that capital, but not including profits from the employment of that capital for the purposes of the mutual business of the body corporate,
(b) assets representing any profits or gains charged to tax as being profits or gains of any part of the trade carried on by the body corporate which does not consist of the conducting of any mutual business,
(c) (so far as not comprised in the paragraphs above) assets representing taxed income from any investments.

(7) In this section "mutual business" includes any business of mutual insurance or mutual trading.

(8) Subsections (3), (4) and (5) of this section shall apply with any necessary modifications—
(a) to a profession or vocation, and
(b) to the occupation of woodlands the profits or gains of which are assessable under Schedule D,
as they apply to a trade.

(9) The provisions of this section apply whether the time when the payment was made to the body corporate fell before or after the passing of this Act

(10) It is hereby declared that the description of trades in subsection (1) of this section does not include any trade all the profits or gains of which are chargeable to income tax and, in particular, does not include such a trade carried on by any registered industrial and provident society.—[Mr. Maudling.]

Brought up and read the First time.

Mr. Maudling: I beg to move, That the Clause be read a Second time.

Mr. Deputy-Speaker: With this new Clause it will be possible to discuss on the Question, "That the Clause be read a Second time" the first two Opposition Amendments in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan) and the Amendment to the second Opposition Amendment in the name of the hon. Member for Hudders-field, West (Mr. Wade) and also the third Amendment in line 86, with a division if required on the second Amendment in line 86.

Mr. Maudling: I apologise for the complexity of this new Clause, but it is necessary to carry out its objective and to ensure that we do not go beyond what we have in mind. In fact, in proposing it, I am doing no more than meeting the points made on both sides of the Committee during the earlier discussion of what was Clause 19 but is now Clause 20 of the Bill in its present form. I will propose later that Clause 20 should be negatived and that this new Clause should take its place.
This proposal is of a very much more limited purpose than the original Clause 19. I can safely say, I think, that the Amendments which you, Mr. Deputy-Speaker, said that we could discuss with it, although relevant to the Clause in its original form, are not relevant to the Clause in its new form because the possible dangers which hon.


Members had in mind cannot arise under the new Clause.
May I explain as briefly as I can the purpose of the new Clause by reference to what was intended by the original Clause 19? That Clause was drafted with two purposes in mind: first, to deal with the taxation of the surpluses of mutual trading companies; and, secondly, to deal with a possible form of tax avoidance which had become more likely as a result of recent court decisions. The new Clause does not do anything on the first point. We drop the first point and concentrate solely on the second point, which is the anti-avoidance provision.
I think that the House will be aware that there is quite a long history to the question of the taxation of mutual trading companies. Under an Act of 1933 it was thought that their profits—or surpluses—had become taxable. A subsequent judgment of the House of Lords in 1946 declared that Parliament had—I think the word was—misfired. In 1955 the Royal Commission recommended that surpluses derived from the trading operations of mutual corporations or mutual associations should be subject to tax.
The original Clause 19 was designed to carry that out for two reasons: first, as I say, because the Royal Commission had recommended it; and, secondly, because it was necessary to deal with a new form of tax avoidance, the possibility of which had been shown by a House of Lords judgment in 1963.
I was impressed by the arguments put forward in Committee on both sides against the general proposition that the surpluses deriving from mutual trading operations should be made taxable. I have therefore proposed this new Clause and my Amendment to delete Clause 20. There will be no question under this new provision of taxing the surpluses of mutual trading associations—or whatever the correct phrase is. I am confining my attention to the situation arising when mutual trading bodies go into liquidation and make a distribution from their surpluses. Here there is the possibility of tax avoidance, which has been opened up by the recent House of Lords decision.
The position roughly is this. In the case of a trader, for example, insuring himself with a mutual insurance agency, the premium that he pays would be a trading expense and therefore he would be able to set it off against his receipts for tax purposes and get a tax allowance in respect of it. If subsequently he received a repayment out of the surplus of the mutual insurance company, that payment in the normal way of business would be a trading receipt, and he would have to pay tax on it. Therefore, the thing would balance up, because he would have in effect to pay back the tax relief which he had formerly had in respect of an excessively high premium.
5.0 p.m.
In normal circumstances one gets relief when one pays, and one gets taxed when one has a distribution out of surplus. This was all right until a decision in the House of Lords in 1963 about a case under the Workmen's Compensation Act where it was held that if the distribution of a surplus was made on liquidation it would be a capital payment and therefore not liable to tax. This, therefore, opens the possibility of organising a mutual insurance corporation and paying to it unjustifiably high premiums which would be deductible for tax purposes as an expense of business. Then the surplus on liquidation of the company could be distributed free of tax to the original payers. That would be clearly a form of avoidance the possibility of which was opened up by the 1963 judgment.
I am therefore confining what I propose solely to this particular problem. The Clause deals only with circumstances in which there is a payment out of a trading surplus accumulated by a body carrying on mutual business. Ordinary capital distribution is not affected, and there is no effect where there has been accumulation out of surpluses which have already borne tax.
This Cause, in an inevitably complicated fashion, provides simply that where there is a mutual trading body and people pay sums to this body which are allowed as deductible expenses of the business, and subsequently the body goes into liquidation and the surpluses are distributed to the members, those surpluses should be liable to tax as they


would have been if they had been distributed before the liquidation of the mutual body corporate.
I have done my best to explain this complicated Clause. We have accepted the clearly expressed view of both sides of the Committee, as it then was, and we are not attempting to tax in any way a surplus which arises in the course of ordinary trade. We seek only to stop up a loophole which could lead to tax avoidance.

Mr. G. R. Mitchison: The Chancellor of the Exchequer has made it perfectly clear that he has changed considerably the scope of the Clause which is now Clause 20 and which he proposes to remove by a later Amendment. As I see it, what the right hon. Gentleman has done is to deal with the type of abuse to which he referred which arises on the liquidation or dissolution of a society or company and in cases analogous to that. The abuse may arise in that excessive premiums may be paid—and a case was mentioned in the 1955 Final Report of the Royal Commission—and, those excessive premiums not having been fully expended in losses, the resulting surplus may be made artificially large and grow and grow and the society may be dissolved and its assets distributed and a similar body set up shortly afterwards.
It is obvious that there has been for many years a form of avoidance to which the Royal Commission drew attention in 1955 and which is in 1964 a target for the attention of the Government. It is quite true that the position has been elucidated by successive decisions of the courts, but there is no doubt about the nature of the fundamental abuse and that this Clause is intended to deal with it. The Clause does not deal at all with the question, which might have been dealt with by the earlier Clause, of a trading surplus arising in the hands of the society or company from year to year, although that too was considered in the 1955 Report. As to that, I do not regard it as our business in Opposition, particularly owing to the somewhat ambiguous character of the earlier Clause to which attention was directed from both sides, to drive the Chancellor to do at the moment more than he wishes to do. He is dealing with tax avoidance, and in that we are prepared to support him.
The resulting position will be that the premiums or contributions will be paid and in the normal course of things will constitute trade expenses deductible by the payer. It seems to me that there may be differences—and this is perhaps rather in the form of the former Clause than the present one—between various cases in which the payer gets his money's worth back, more or less. In some cases, because this is often mutual insurance, there will be compensation for a loss which I would have doubted to be an income receipt. If, for instance, the mutual association consisted of shipowners—and there are a great many such cases in which they pay premiums to meet contingency losses not covered by an ordinary insurance policy—I doubt whether those losses are anything from which tax can be deducted, because they receive indemnity for the losses.
I do not think that that question actually arises in connection with the abuse at which the Chancellor is aiming. We know that he is not going as far as he originally intended to do. On this side of the House we must reserve our position with regard to what the Chancellor had originally in the Clause, which was open to formal objection and which he has now left out, and we must agree with him that in general the Clause is satisfactory.
This is, however, a most complicated Clause and with humility and respect I must agree that the right hon. Gentleman is perfectly right to spare us a detailed exposition of it. I hope that I have understood, more or less, what it is about, but a great many people affected by it will also find it complicated. In these circumstances I wonder whether in the case of people who found difficulty about the former Clause it should not be made abundantly clear that they are not covered by this Clause.
I admit at once that the Chancellor has gone a long way to do this by the addition of subsection (10), which excepts a trade carried on by any registered industrial and provident society. This goes a long way, and it may be the whole way, towards meeting many cases and it was inserted presumably because it was necessary, as I think it was. At the very least it was a highly reasonable precaution to take.
I wonder whether the Chancellor would consider going a little further I


have three types of bodies in mind. The first are the co-operative bodies, and again I recognise that this question will arise only on the distribution of a surplus at the end of the day and not in connection with a surplus gained year by year in current mutual trading. Cooperative societies include, of course, both the ordinary retail societies and the agricultural co-operatives which are in general very similar. I know that they are registered industrial and provident societies, but I do not quite see the objection to naming them specifically.
Then, it is said that the Clause is not to include
a trade carried on by any registered industrial and provident society".
The Government's original case was that those bodies did not carry on a trade. That is a matter that we argued in Committee, and there is some inconsistency between the line taken then by the Government and subsection (10). I think that the new Clause is right. This is, however, a difficult field and it is extremely difficult to be clear what we are or are not doing. Those responsible for the Finance Act, 1933, found it to their cost. That misfired and the results of their misfire now appear as Section 444 of the 1952 Act. That got there when the Act was codified. It is the Section under which the cooperatives, for example, have always been dealt with. It has something about them in the side note and it is, as it were, their special Section. It includes other bodies, too.
I gather that it is not intended to put more tax in any form on the co-operative societies. The Chancellor worried me a little. When he said that those societies did not trade, that was all right, but when he says, as he does in the new Clause, that it does not apply to any trade carried on by them, I wondered what would happen at the end of the day when they were dissolved. In most cases, they would be bound to have a surplus. Will the Clause have any effect on that or will it not? The surplus will be an accumulation which, under Section 444, has been taxed as it came in year after year. In the particular case of the co-operative societies, it cannot be very much else. That is the first case which I put to the Chancellor.
The second one is the question of the clubs. Those with which I am concerned are the Working Men's Club and Institute Union Ltd. clubs, together with the Conservative clubs, since we on this side are pre-eminently fair-minded and we see no great distinction other than political allegiance between the clubs concerned Indeed, there is no political allegiance in the case of the working men's club. We should have no objection whatever to the inclusion of the Liberal clubs. I am sorry to have to confess that I did not even know that there was such a body as the National Union of Liberal Clubs. I have an excuse, because I looked at the relevant passage about this in Halsbury, which included all the bodies I have named and one or two others, but whoever prepared the passage fell into my error of not being aware of this body's existence. There it is, however—or I assume that it is—and, clearly, it should be treated in the same way. They are the bodies with which I am concerned.
I add one other case. The British Legion has clubs all over the place. I do not know much about the form they take. I remember that an unfortunate Member of this House once had to be indemnified by special Statute for auditing the accounts of one of the branches because there were rather obscure legal provisions about this. One does not know whether they are satisfactorily covered. I expect that they are.
Reverting to the other clubs, is it clear that the title "registered industrial and provident society" includes all of them? I have tried to ascertain, but have been unable to do so, whether any of them are registered as anything else. In some cases, I am not sure that they are not. I do not know whether the Chancellor or another Treasury Minister has information about it. I do not see how one of them can be a friendly society. It remains the fact, however, that these bodies think that they are, probably because as an industrial and provident society they have to go to the Chief Registrar of Friendly Societies. There are, therefore, doubts about the status of all these bodies. Although I have no doubt that it is intended to exclude them, I should like to know whether the Chancellor takes objection to mentioning them specifically.
5.15 p.m.
Our three Amendments are slightly different in scope. The first Amendment would prevent additional taxation in the case of any body now dealt with under Section 444 of the 1952 Act. That would clearly include the co-operative societies. It would include other bodies, too.
The second Amendment is clumsy and curious, but, at least, it has the benefit of mentioning the bodies particularly concerned. It arises in this way. When any of these bodies has to register its rules or an alteration in them, it applies to the Chief Registrar of Friendly Societies and is charged a fee. In certain cases, however, where the application comes through some sponsoring body, including all the bodies mentioned in the Amendment, except the Liberal clubs—I do not know about them—they get a reduced fee. It is, therefore, a way of indicating the kind of body that is intended to be excepted. Moreover, it may be clumsy but, at least, it makes clear to the people concerned that they are excepted irrespective of the form which, say, a British Legion club or a particular working men's club or similar body may take.
I therefore suggest that the Chancellor could do no harm by making it clear in those cases and that acceptance of the Amendment would help a number of bodies who have been worried not only by the obscurity, which is now admitted, of the original Clause, but also by the fact that it has all been taken away and a new Clause, equally unintelligible, has been put in its place. It is so much better when we do not intend to damage people in a case like that simply to tell them so and to indicate the types of bodies concerned.
The last of the three Amendments, which I mention only in case the Chancellor prefers it, is more limited, because it simply refers to the working men's clubs and nothing else. It therefore does not cover as wide a field.
Those are the considerations which I put before the Chancellor on the Amendments. I hope that he may see his way to accept one or more of them, but I imagine that whoever drafted the new Clause, or all those concerned in drafting it, must now be so pleased and proud of the result that they probably would regard any addition to it as a piece of

amateur impertinence. They should, however, remember that they are dealing with people who are not particularly good at the law in these matters—indeed, it is sadly complicated—and who have been really worried, not only by the Clause, but by the form in which changes have been brought forward.

Sir Donald Kaberry: In Committee, I had the honour and pleasure of moving an Amendment to what was then Clause 19 of the Bill on behalf of a number of clubs. I declared a specific interest because I happened to be chairman of an organisation, a company limited by guarantee under the Companies Acts, known as the Association of Conservative Clubs Ltd.
The Amendment sought to remove doubts which existed in the minds of a large number of club people of all shades of political opinion, social status and all the rest throughout the country. The fear was that as the Clause was then presented there might be some broader interpretation of the words "mutual business" or "mutual trading", but I think that most of us here accepted that a social club as a club does not trade in the accepted meaning of "trade" for purposes of being liable for the payment of Income Tax. There was a doubt, however, and the more explanations that were given the more the doubt prevailed.
I for one was very glad to accept the very generous undertaking given by my hon. Friend the Financial Secretary that he would look at all the arguments presented in the discussion in Committee—in which the hon. and learned Member for Kettering (Mr. Mitchison) took a very full and free part—and would bring the matter before the House again at this stage. I readily accept the revised version—in fact, one might call it the completely new version—of what is now Clause 20, to the extent that I think it is abundantly clear that this revised Clause could never relate to the social or political club in relation to any allegations of trading activities.
Indeed, the Clause itself never arises year by year in relation to such an organisation, and even on the widest and wildest interpretation it would apply only on the winding up of such an association or club. To that extent, therefore, I


would say to my right hon. Friend the Chancellor of the Exchequer, "Thank you very much indeed."
I listened with interest, if I may say so and as I always do, to what the hon. and learned Member for Kettering had to say and I would hope that my right hon. Friend the Chancellor would not give heed to the plea made by the hon. and learned Gentleman, particularly with regard to his second Amendment, because I think that it would add to the confusion of interpretation as to whether or not a club might or might not be liable for tax.
There are several grounds on which I say that, but I think that one of them is abundantly clear from the words used in the Amendment itself. The Amendment is rather loosely drawn. It is unfortunate that Transport House did not send a message a few hundred yards away to 32, Smith Square, in order to get the correct title of the Association of Conservative Clubs, but perhaps Transport House was being besieged at the time when the message should have gone.

Mr. Mitchison: I am much obliged to the hon. Gentleman. I am afraid it is not in Halsbury.

Sir D. Kaberry: Be that as it may, I do not know where Halsbury creeps into the Association of Conservative Clubs.
Likewise, I think there is a fundamental error in the Amendment, because it requires exception to be made for clubs or industrial provident societies the rules of which have been approved through a number of defined bodies including the
Working Men's Club and Institute Union Ltd., Association of Conservative Clubs and the British Legion".
Not all clubs, however, have their rules approved through those bodies. Certainly the organisation for which I speak does not ask for strict regimentation—all in or all out. Clubs are free and autonomous. Many clubs are not members of the Association and it would, therefore, be wrong to limit them in this way.
The hon. and learned Member referred to the clubs of the British Legion. There are a large number of ex-Service men's clubs in the country which are not, in fact, formed through the British Legion. If I may speak personally on that point, I know of one club which at this moment

is being formed in my constituency and which for reasons of its own does not wish to be formed through the British Legion. Therefore, I think that there would be an answer of limitation on a cover of that type which might at some time give rise to doubt if this Amendment were to be accepted.
The hon. and learned Member referred to the different types of clubs. Many clubs are registered under the Friendly Societies Act for the reason that they do better for themselves. Many are formed under the operation of the Companies Acts, clubs limited by guarantee. They would be excluded from this Amendment. Recognising the good intentions which are, perhaps, behind the Amendment, it would seem to me to add doubt and difficulty to a Clause which will probably have to be explained by lawyers in other places in the future and would give rise to additional doubt if this Amendment were added. Therefore, I hope that if the Amendment is moved it will not be pressed and that in replying to the debate my right hon. Friend the Chancellor or my hon. Friend the Financial Secretary will make it abundantly clear again that social clubs are specifically not included in the provisions of this new Clause.

Mr. Angus Maude: While I yield to nobody in my sympathy with the hopes and fears of social clubs, I hope that the House will forgive me for recalling to it that what this new Clause does is something of a rather greater order of magnitude than that. Having in Committee spoken with some fervour about what I regarded as the imperfections of Clause 19, as it then was, it only remains for me briefly, but very warmly, to thank and congratulate my right hon. Friend the Chancellor on having personally looked at this matter again with his usual care and attention and on having dropped one of the few main principles of Clause 20, as it now is, of the Bill.
There is no doubt that the new Clause is a quite monumental and difficult one, and I do not suppose that any hon. Member has really felt confident that he could appraise it himself without taking legal advice.
I am advised and reassured that those of my constituents who were worried about the original Clause in so far as


it purported to make taxable trading surpluses of mutual insurance societies are completely reassured that the new Clause does no more than cover what we had all recognised, my constituents not least, was the perfectly desirable business of stopping a particularly dangerous kind of tax evasion.
The hon. and learned Member for Kettering (Mr. Mitchison) was, I thought, perhaps a little dubious in his acceptance of the principle that this should be tried.

Mr. Mitchison: No.

Mr. Maude: The hon. and learned Gentleman was a little dubious. He said that he reserved his position about his future attitude on the question of the taxation of surpluses of mutual insurance societies.
I should have thought that this part of the intention of the original Clause would have died unlamented by anybody except a few purists at the Inland Revenue nostalgic for the halcyon days between 1933 and 1946 and earnestly wishing to follow the Royal Commission's recommendation, right or wrong.
Perhaps the hon. and learned Member for Kettering might with profit refer to the words of the learned law Lord, Lord Macmillan, in the judgment on the Ayrshire case which I cited in Committee, because I think the words are worth returning to again and again. Lord Macmillan—this was when the Ayrshire case in terms of the intention of the 1933 Finance Act had misfired—said that the failure of the Legislature
… is perhaps less regrettable than it might have been, for the subsection has not the meritorious object of preventing evasion of taxation, but the less laudable design of subjecting to tax as profit what the law has consistently and emphatically declared not to be profit.
While the hon. and learned Member may reserve his position, I hope that he and the Labour Party and anybody else who may once again be tempted to revert to the deplorable fiasco of the attempt to subject to tax the surpluses of mutual societies will take those words to heart.
Once again, I say that I am extremely grateful to my right hon. Friend and the Financial Secretary for the very great care they have taken in clearing up this

matter. They could not have taken more trouble about it, and I and my constituents and many others are extremely grateful to them.

5.30 p.m.

Mr. R. M. Bingham: Some harsh words were said about the original Clause in Committee, and as the author of some of the words I rise now merely to acknowledge that the Government have made what can only be described as an ample response to the criticisms. The drafting of the old Clause received a great many criticisms. Complex though the new drafting provisions are, they seem very much more straightforward, more precise and in many ways very much simpler than those of the old Clause.
As to the substance of the new Clause, the main difficulty, as I understand it, facing the Chancellor and the Treasury has been the principle that distributions in liquidation are capital, and it would seem that the new Clause has steered round that principle with considerable and scrupulous care.
There are only two small points to which I would refer. The first concerns subsection (2) of the new Clause. At the moment I find it difficult to see what the purpose of the new subsection (2) is. It provides that the person who is to be charged under subsection (3), the person making the transfer or surrender, shall be deemed to have received consideration equal to the value of the right transferred. I can see that that is aimed at a collusive transfer or surrender by which the person receiving payment for the right receives money which is less than the real right. I can see that on a surrender back to the body corporate it might to some extent go to swell the power of the body corporate to make distributions which would not be caught, but I cannot see that subsection (2) has any great effect where a transfer is concerned. Indeed, it might lead to an ability in the Treasury to recoup itself in respect of the same amount of tax twice over, because the person who made the transfer will be deemed to have received consideration equal to the value of the right, and to that extent he would be a recipient under subsection (3), and the transferee would, as far as I can see, also be a recipient in respect of the same


right under subsection (3), and so tax might be claimed or charged twice over from two people in respect of the same amount. But there may be reasons which I do not understand for subsection (2), and I raise this matter only for elucidation.
The other point relates to clubs, cooperative societies and the British Legion. I ask my right hon. Friend not to accede to the Amendments because it seems to me that the position at the moment is clear, and, as has been said, confusion would be introduced if definitions exempting bodies which are already exempt were introduced. In this connection, subsection (3), which is the only charging subsection in the new Clause, does not create a charge unless there has been a deduction allowed for Income Tax. That must rule out any question of retail co-operative societies being caught. I should have thought that it ruled out any clubs. So far as I understand the operations of the British Legion, of which I am a member, I do not think that any payments made to it are paid under deduction of Income Tax, and that would seem to me to be an added reason for saying that in no circumstances could those bodies be caught by this Clause.
With those comments, I welcome the Clause, and thank my right hon. Friend for its introduction.

Mr. Maudling: If I may speak again by leave of the House, I am glad to note that the House generally prefers the provision in its new form to the Clause which I originally introduced in the Finance Bill.
If I may reply to one or two of the points made, I do not share the fear of my hon. and learned Friend the Member for Liverpool, Garston (Mr. Bingham) about the position under subsection (2), which is designed to cover any attempt at tax wangle in the case of a transfer, and to ensure that no benefit is made on the side. It provides that the original recipient will be taxed at the true value.

Mr. Bingham: There is a possibility under the Clause that tax might be recoverable or chargeable from two persons in respect of the same amount of money. If my right hon. Friend can

say that that is not the intention, that would remove all my doubts.

Mr. Maudling: It is not the intention, and from my quick reading of the provisions since my hon. and learned Friend spoke, I am sure that that could not occur.
With regard to extending the Clause, it would be unwise to amend it any further. It is made clear in subsection (1) that the Clause does not deal with the taxation of mutual concerns. The Claus; arises only where mutual concerns are being wound up or dissolved. The Clause is concerned with payments made by mutual concerns to their members on dissolution.
Secondly, it is made clear in subsection (3) that the Clause is concerned only with circumstances where the payment to the mutual concern has been allowable for tax. That rules out clubs and a whole range of social bodies. It is a perfectly clear provision.
Subsection (10) makes clear that the description of trades in subsection (1) does not include any trade all the profits and gains of which are chargeable to Income Tax. This covers co-operatives. Where people are not trading this provision does not arise, for if people are not trading, they are not subject to tax. The position is perfectly well covered.

Mr. Mitchison: I am not quite certain about clubs. They have a practice of receiving visitors. They have arrangements for exchanging membership facilities between their own members and members of outside clubs. Does not that affect the position? Are they still dealing merely with their own members, or are they not dealing with visitors?

Mr. Maudling: If they are, in these circumstances, trading, they will be subject to tax on receipts, which will be trading receipts, and that will be excluded by subsection (10).
The point is that the Clause does not bring any new class of taxpayer into liability and it imposes no charge on trading profits of mutual societies. It merely removes an anomaly. Under the present system, a distribution made by a mutual concern which continues in existence is liable to tax. A similar payment made by the same concern to


the same person on dissolution is not liable. We are rectifying an anomaly, not bringing in any new charge. The provision cannot possibly affect clubs and societies to which reference has been made.
I share the view that to add any Amendments would do positive harm because, in the first place, to include in a provision certain individual bodies by name always raises questions about those left out. Secondly, it is clear that the main subsections could not possibly affect things like clubs. To put in a specific exemption of people who could not in any case be affected by a Clause would darken counsel. It would not aid our common purpose to make any further amendment.

Mr. Mitchison: I agree with what the right hon. Gentleman says about specific exemptions. It might, indeed, easily darken counsel. The right hon. Gentleman has dealt with registered industrial or provident societies. What about companies limited by guarantees and various other forms which are well known to the hon. Member for Leeds, North-West (Sir D. Kaberry)?

Mr. Maudling: It is sometimes unwise to be over-cautious. The purpose of subsection (10) is the avoidance of doubt. From the point of view of cooperative and provident societies it will be convenient, but it is not necessary.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 1.—(PRESERVATION OF PENSION RIGHTS.)

(1) In section 379 of the Income Tax Act 1952 (Approved superannuation funds), there shall be inserted after subsection (1) the following subsection:—
(1A) Where the rules of the fund provide that an employee who leaves the employment of an employer in the trade or undertaking for reasons other than fraud or misconduct by the employee shall not thereby be deprived of the benefits provided for him in the fund, the employer may in computing profits or gains referred to in subsection 0) deduct as an expense incurred in the relevant year a sum equal to one hundred and one per cent. of his contribution to the fund".—[Mr. Wade.]

Brought up, and read the First time.

5.45 p.m.

Mr. Donald Wade: I beg to move, That the Clause be read a Second time.
The purpose is to encourage superannuation schemes under which the employees are not deprived of the benefits under the fund when they move to other employment. It is also intended to facilitate the transferability of pension rights. There is a distinction between preservation and transferability. I do not propose to go into all the technical aspects of it. However, I think that hon. Members will agree that preservation and transferability are closely related.
Under this Clause, the employing firm would derive certain tax benefits where the rules in the fund contained the required provision ensuring that the employee would not lose his accruing rights under the superannuation scheme when moving to another job. The words used are:
… the employee shall not thereby be deprived of the benefits provided for him in the fund. …
I make it clear that I do not consider a cash option as in itself satisfying this condition. In a number of schemes approved under Section 379 of the Income Tax Act, 1952, where the scheme is a contributory one, there is option for return of contributions less tax. The matter is rather more complicated, but I use that expression for now.
It may be tempting to an employee leaving one firm for another to take cash when it is offered to him. But he may well regret it later. The cash is worth very less than the accruing rights he gives up. Furthermore, the cash option defeats the object of superannuation schemes, which are designed to provide for retirement to ensure that the person shall have a reasonable income and not have too big a drop in income on retirement.
Subject to that point about cash option, the aim of the Clause is to ensure that the employee shall not lose accruing benefits, whether the scheme is contributory or non-contributory. His rights could be preserved either by a deferred pension or by an ascertainable transfer value, which would enable him to enter another scheme with a new employer without loss of benefit.
I must admit to difficulty in devising a Clause that would be in order and


likely to be selected. That is why the Clause is worded in this way. There may be objection to it in detail, but I hope that the debate will provide an opportunity to pay attention to general principles, the importance of transferability of pension rights and the need for some action. I am sure that this subject is likely to be of increasing importance and it has great relevance to mobility.
The N.E.D.C. Report, published in April, 1963, entitled "Conditions favourable to Faster Growth", drew attention to the fact that lack of transferability is an obstacle to mobility, especially managerial mobility. Paragraph 45 of the Report said:
The practice of making pension rights transferable on change of employment may well have increased in the private sector although the industrial inquiry indicated that the non-transferability of pension rights continues to be a serious obstacle to the mobility of higher grade staffs. Consideration should be given to making preservation of pension rights on transfer of employment a condition of approval of a pension scheme by the Inland Revenue.
According to a report in The Guardian, the Chancellor of the Exchequer made a statement about this on 6th May. The Report said:
At yesterday's meeting of the National Economic Development Council, the Chancellor of the Exchequer, Mr. Maudling, said that the Government Actuary would make an inquiry into the facts and figures of private pension schemes and that without waiting for the results of this, discussions would start on the problems.
Commenting on this, the labour correspondent of The Guardian wrote:
Legislation may be required to sort out the tangle of private pension schemes although the Government will probably first try to bring about voluntary agreement in consultation with employers and the T.U.C.
I hope that we shall hear something more about this. Let there be discussions by all means, but it may well be found that legislation is required, especially to clarify the attitude of the Inland Revenue to the approval of superannuation schemes and to rationalise the principles and practices in the approval of those schemes. At present, there are considerable difficulties because several Sections of the Act deal with approval. I raised this matter in a Committee debate on the Finance Bill on 2nd July, 1957.
The N.E.D.C. Report refers to the difficulties of managerial staff, but a wide variety of employees are affected. Commercial travellers are an example. I have discussed this matter with the United Commercial Travellers Association. A commercial traveller may have been working for a number of years for a firm which has a superannuation scheme offering him the prospect of a reasonable pension on retirement. He may wish to move and become the representative of some other firm, or the firm for which he has been working may suddenly become involved in some merger or take-over so that he finds himself out of employment and with all his accrued pension rights lost, or at any rate at a negligible value.
This can be a serious matter for a man in his 40s. For many people over 40, non-transferable pension rights can be a serious obstacle to advancement and sometimes an obstacle to getting a job, because firms do not always want to bring into a superannuation scheme people already over 40. There was a time when all these schemes were regarded merely as a means of encouraging a good employee to remain with a firm, but they must now be considered in a much wider context, for they have become one of the important conditions of modern employment.
Mr. Basil Taylor has had some forthright comments to make on this subject. In an article in the Statist on 22nd March, 1963, he said:
No employer can argue that the general body of taxpayers—the electorate in fact—intended to subsidise pension schemes in order that that could be a means of compelling older employees to stay with their firms for fear of loss of all or much of their 'pension rights' if they left.
In a broadcast reported in The Listener on 19th September, 1963, he said:
I cannot believe it is in the public interest or just (by democratic standards) that a system of valuable tax relief should operate so as to tie the employee to his employer. That is the first problem: lack of transferability of pension rights—the danger (or even certainty) of losing some or all of your pensions rights accumulated hitherto, if you change your job.
It is not easy when an employee goes from employer A to employer B to place him in precisely the same position as he would have had if he had remained in his original employment. Much can be done by reciprocal arrangements, for example, in an


industry as a whole. There are reciprocal arrangements in the Civil Service and local government service. I understand that
the transfer values are determined by standard tables prepared by the Government Actuary. It is a more difficult problem when a man moves into or out of Government service, or from one private firm to another.
The late Lord Beveridge had an interesting comment to make on this subject of moving from the Civil Service to the private sector of industry. In a foreword to a book entitled "Pension Schemes", by Michael Pilch and Victor Ward, he said:
After ten years of extremely strenuous service, first in starting Labour Exchanges and Unemployment Insurance, and then in the First World War on Munitions and Food, I left in 1919 on my own account to become Director of the London School of Economics, and I asked the Treasury if I could get anything on account of pension for my years as a Civil Servant. The answer, as I described it later, became one of my greatest treasures: 'Since I was less than 60 years old, they could do nothing for me without evidence that I had become either physically or mentally incapable'.
Many years have elapsed, but the anomaly remains.
Mr. William Phillips, who is an expert on this subject, refers to it in an article which has been reprinted from the British Tax Review. He refers to the arrangements in the Civil Service and in local government and goes on:
… it has so far been a fixed rule that no such scheme shall pay a transfer value to any private scheme …
Later in the same article he says:
Naturally, that being the position no one can sensibly advise a private scheme to pay transfer values to a Government or local government scheme.
To come even more up to date, this subject was mentioned in a very interesting document prepared by the Engineers' Guild and entitled, "Preserving Pension Rights for Professional Engineers". I give one quotation dealing with the problem of moving from Government to other kinds of service:
Thus, we have the irrational situation that a professional engineer leaving government service voluntarily, below the age of 50, can preserve all his pension rights if he goes to a local authority, a nationalised industry such as coal, electricity, or railways, to teaching, the B.B.C., the I.T.A., B.E.A., or B.O.A.C. … However, should he go from government

service to, say, a consulting engineer, a contractor, or manufacturer … he will lose virtually all pension rights.
The main problem, however, arises in the private sector, moving from one private firm to another. This is partly due to the mass of piecemeal legislation and the need for reform.
The Clause does not go all the way to making transferability of pension rights compulsory. There may be better ways than the Clause proposes and I tabled two alternatives in Committee. Obviously, I cannot discuss those now, but I merely mention as a possible solution the laying down of certain conditions to approval under Section 379 of the Income Tax Act, 1952, to make it necessary to have preservation of pension rights, whether the pensions are contributory or non-contributory.
I raised this subject in the debate on 2nd July, 1957. I think that the climate of opinion has been gradually changing, but very little has been done. The opposition to any legislative action was expressed at that time by the present Minister of Housing and Local Government. I do not know whether he was expressing his own private view, or the Government's official view, on this subject when he said:
If there was ever to be legislation—and I hope that it may not be necessary—account will have to be taken of the solvency of these schemes. It is true that actuaries in setting up these voluntary schemes do have to take into account the fact that certain individuals are inevitably going to leave at an assumed average rate and that they will forfeit any contributions that have been made on their behalf.
Any windfalls falling into the hands of the fund in this way are discounted by the actuaries, and any obligation to preserve pension rights would remove these windfalls which have already been taken into account in making the scheme solvent …"—[OFFICIAL REPORT, 2nd July, 1957; Vol. 572, c. 897.]
I should have thought that to describe the movement of an employee from one firm to another as a windfall displayed a rather complacent attitude to the whole subject of mobility in industry.
6.0 p.m.
We must recognise that contributions to superannuation schemes are, in effect, forms of deferred pay. Moreover, substantial tax reliefs are involved. There are today enlightened firms which recognise this and try to arrange for the


transferability of pension rights, but I do not think that one can leave it entirely to the discretion of trustees of particular funds, or leave things in the haphazard state in which they are today.
What is the remedy? There is no simple solution. In theory, one could get over the problem by making everybody an employee of the State, but heaven forbid that that should ever happen in this country. Again, I suppose that we could have only one superannuation scheme drawn up by the State, and nationalise, directily or indirectly, all the insurance companies, but I would not advocate that either. I think that one has to remember that much of the initiative and pioneering work have been carried out by enlightened firms and life offices specialising in this kind of work. I believe that there could be great advances in reciprocal arrangements.
The party to which I have the honour to belong has worked out its social security plan, but I believe that these private schemes must play an important part in the future. I think that they will always be necessary to supplement whatever State scheme is devised. I believe that there is an important rôle for the trades unions and life offices to play in the evolving of these schemes, and that the time has arrived when the whole subject should be taken much more seriously and regarded as a matter of urgency. I suggest that the steps to be taken should include, first, rationalisation of the provisions dealing with the approval of schemes, and, secondly, recognition of the importance of approving schemes and including in them some provision relating to the transfer of pension rights. There should be a rule in every scheme which will provide at least minimum conditions for the preservation of the transferrabiilty of pension rights, and, if necessary, there should be added tax inducements on the lines suggested in the new Clause.
This is a key subject in a modern industrial society. There has been much pious talk and many general commendations from the Government of the idea, but what is required today is action.

Mr. Arthur Tiley: I congratulate the hon. Member for Huddersfield, West (Mr. Wade) on having the ingenuity to be able to frame a

Clause in such a way that it is selected for discussion by the Chair.
This is a fundamental issue in the future of pensions legislation in this country, and it is very fitting that my right hon. Friend should be on the Front Bench waiting to reply to the debate because, although I am not sure what he knows about these damned dots—I am not being offensive; I am quoting from a document—he knows a lot about pension schemes. The hon. Member for Huddersfield, West and his party have a forward-looking view on pensions, and I am glad to be associated with the hon. Gentleman in paying a tribute to the good employers and the life officers for the work which they have done in the past. They thought about pensions long before politicians collared the field for party purposes. When the Government Actuary completed his review of private schemes 10 years ago, there were no less than 40,000 private schemes in operation.
Good employers brought in the schemes for two reasons: first, they wished to reward long and faithful service by providing an adequate retirement pension and removing the worry of old age. The purpose was to provide what in insurance parlance—and I ought to have declared my interest in insurance—is called happy old age. The second reason was to retain their employees, because intelligent employers realised that the most important thing was not the stock, the machines, or the buildings but the staff who worked in those buildings and at those machines.
Those ideas are to a great extent now out of date, because we are entering into a new phase in industry when men move not merely from one job to another but, because of technological advances, change their occupations, and perhaps move from one part of the country to another. At the wish of both sides of the House, men are being asked to move to the North and to Scotland so that those areas can enjoy the advancing prosperity of the South. This makes it essential to try to achieve mobility.
In most pension schemes, apart from the fact that pensions are withheld for fraud and misconduct, the only other condition which prevents an employee from obtaining the whole benefit of the scheme is a change of job without the


permission of his employer. For instance, if a firm goes into liquidation, or if there is a take-over bid, or if the firm meets with hard days and its scheme is brought to an end, the members of the scheme receive the full benefit of it up to that moment. They receive their contributions and those which have been made by the company. The only deterrent to the well-being of pension schemes in the future is the point about mobility, because employers, especially those with non-contributory schemes, did not encourage their employees to move from one job to another. If a man went from one job to another without the consent of his employer, he was precluded from benefiting from the contributions which had been paid. Many enlightened employers have, however, allowed their employees to take full advantage of their schemes when they have moved to other jobs.
My right hon. Friend is an expert on pensions. We must find a way of achieving what the Clause sets out to achieve, namely, mobility, but we must be careful how we achieve this, because there are in being thousands of private contracts which have been effected on the non-contributory pension arrangements for the benefit of the employer, paid for by the employer, and this Clause would seek to break all these private contracts.

Mr. Eric Lubbock: Would the hon. Gentleman consider the way it has been done in France, where there was a gradual approach to this by the protocols of co-ordination between a number of different schemes?

Mr. Tiley: Yes. I should think that an agreement could be achieved by consultation between both sides of industry and the trade unions on the way in which to deal with schemes which are already on our books.
I would have been happier if the Clause had contained a provision which prevented a man withdrawing from a pension scheme and taking a cash payment. The whole idea behind the pension scheme, whether it is a matter of deferred pay or not—and the reason why the Inland Revenue tax rebate is given—is that it provides, year by year, for the day when a man retires. Far too many people have left pension schemes merely to get hold of the cash. I know of some very sad

cases. Only a few weeks ago a man left his pension scheme and took about £1,000 in cash because he wanted to live in a cottage with a mistress.

Mr. James Callaghan: A worthy idea.

Mr. Tiley: The hon. Member for Cardiff, South-West (Mr. Callaghan) is always a sport. He will enjoy the General Election, together with his adversary.

Mr. Callaghan: Why not?

Mr. Tiley: That is all very well, but that man will have lost a pension of £500 or £600 a year which he had paid for. It would have been there for him at 65. Now he will be "playing pop" because the National Assistance benefits are so low. That is the sort of thing that we must discourage.
I want to see transferability, but I want to make sure that pensions are transferred, and not the right to demand a cash payment. Some help will be required from the Government. We must create a clearing house for frozen pensions. We have set up a clearing house for the graduated pension scheme, under which records of millions of contributions are kept year by year. We have a computer in the north of England to do the job, and I see no reason why we should not adopt this method of frozen pensions.
The computer can ensure that whatever contributions may have been paid while a man is working for one firm, at the moment of leaving it can be established what his pension rights are. We could easily find a way of transferring a frozen credit to a bank, where the pension will remain until pension age is reached.
I hope that my right hon. Friend will agree to consider this important question, because the whole subject of pensions—whether it is the State against private insurance does not matter—is dependent on achieving mobility. Our future industrial well-being is dependent upon our harnessing to all the changes that will take place in jobs and in employment in various parts of the country, the administrative data the details of which are provided for us. It is our job to find a way to achieve this, and


I hope that my right hon. Friend can show us how the Government can take a lead in this matter.

Mr. Callaghan: I should like to thank both the mover of the new Clause and the hon. Member for Huddersfield, West, who has just spoken—

Mr. Tiley: Bradford, West.

Mr. Callaghan: I am sorry—I meant the hon. Member for Bradford, West (Mr. Tiley)—

Mr. Tiley: The right county, anyway.

Mr. Callaghan: Never forget Glamorgan. Glamorgan did win the county cricket championship. The hon. Member for Bradford, West speaks with a great deal of experience of this matter.
I do not know what the Chief Secretary will say about the Clause, but I do not think that my hon. Friends and I can support it. The reason is contained in the name of Beveridge. The hon. Member for Huddersfield, West (Mr. Wade) spoke of Lord Beveridge's pioneering work in this matter. He will agree that Lord Beveridge would hardly regard this as a revolutionary innovation.

6.15 p.m.

Mr. Wade: I can assure the hon. Member that in this case it was not so much the influence of Beveridge that resulted in the wording of the Clause; it was rather the difficulty of devising a Clause that would be called at all.

Mr. Callaghan: If the hon. Member says that, I withdraw my remarks immediately. I have every sympathy with him. We frequently do the same thing ourselves.
I congratulate the hon. Gentleman on having found this way of drawing attention to the matter. In that case I will devote no more time to the argument why I feel that the Clause, as it stands, would not achieve the purpose which the hon. Member and his colleagues have in mind. I do not think that any of those employers who value the immobility conferred by their schemes will give them up for the sake of the odd 1 per cent.
But the problem is a real one. As the hon. Member for Bradford, West said, many employers devised their

schemes in order to conserve their labour force and to ensure that it was stable and not mobile. Furthermore, there is no doubt that a number of employers originally entered this field because they felt that the State superannuation schemes were not adequate to meet the needs of old people.
One of the problems of the 1960s arises from the great gulf that exists between the man at work at the age of 59 and the man who has retired at the age of 61, and the decline that takes place in the standard of life of himself and his wife. That decline is becoming of increasing importance to the conscience of the nation, and we must do something to put the situation right.
I would tell both hon. Members that I do not think that we can deal with this problem in the way that they propose. A much more radical solution is required. I see the possibility of introducing clearing houses, and that sort of thing, but this is a situation in which we have to make a clean break. People today want to see the elderly given a much higher standard of living in retirement. I do not think that we can achieve this aim by a continuation of this kind of scheme.
Old age is universal; these schemes are not. Old age overtakes us all; these schemes do not embrace everybody. It is still true that only half our population is covered by these schemes, despite what can be called lavish tax concession to those who have introduced the schemes. By the very nature of our industrial system it is quite impossible for the whole industrial population ever to be covered by this type of scheme. If the time has come to make a great step forward—and my hon. Friends and I believe that it has—it must be a universal step forward.
Without embarking on a great pensions discussion, which I am sure would be out of order, I must point out in my view the graduated pension scheme has not caught the imagination of our people; nor do they believe that it provides a sufficiently good bargain. Those who take the trouble to work out what they get under the graduated scheme, and compare it with the benefits of other schemes, feel that they are not getting all that they might. I shall not go into the finances of the matter; that must be reserved for another day. But the time has come when, rather


than provide extensions of this type of scheme, or concessions for it—worthy and useful though it has been, and covering many people though it does—we should make a much bolder step forward in national superannuation. That is why we feel that we cannot support the Clause. We want to see these schemes becoming all-embracing and universal.
I say to the hon. Member for Bradford, West, with some personal feeling, that it is not enough to introduce a scheme under which a man's benefits are frozen at the moment when he leaves his occupation. I am a victim of such a scheme. After 13 years of Tory misrule my little pension is worth very much less than it was at the beginning.

Mr. Tiley: The hon. Member must bear in mind that he stepped out of the scheme of his own choice—

Mr. Callaghan: Did I?

Mr. Tiley: —and that he had the ability to choose to remain in, with the firm that he was then with, or to step out of pensioned employment.

Mr. Callaghan: The hon. Gentleman must not probe into the direct relationship between my hon. Friend the Member for Sowerby (Mr. Houghton) and myself. I am not sure whether my hon. Friend would agree that I stepped out.
I believe that we must have a transferable system to enable people to carry their benefits from one occupation to another. That would make for a tremendous change in a number of aspects of the question, not all of which have been thoroughly explored. I think that is the next move which must be made and for that reason I hope that the Liberal Party will not press this Clause, realising that it was put down so as to provoke a discussion. In that respect, it has been successful.
We need more mobility in our industrial life and the way to get it is to ensure that benefits which have accrued to a person employed in one company or firm are transferred, and are transferable, to another company or firm. That could be done by legislative action and it would be the simplest way round the difficulty. Regarding the increased superannuation benefits that would accrue, I believe that

here again the country is ready to pay for old age, provided that the contributions are raised equitably and based on the capacity of a person to pay.
Hon. Members on this side of the House reached the conclusion some time ago that the present poll tax has reached the maximum of its usefulness and must be replaced by a wage related superannuation scheme in which superannuation is paid for according to the level of a person's income. If we introduce this reform of carrying benefits throughout the whole of a person's working life and relating the payments to wages, it would be a bold step forward along lines which I think would have been agreeable to Lord Beveridge, and which he might have envisaged had he been thinking about the next step forward.
It is no disgrace to anyone to say that it was not done 20 years ago. The attitudes and minds of people change. I think that now we are ready for the next change and on those grounds I cannot support the Clause.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter): For reasons almost diametrically opposed to those deployed by the hon. Member for Cardiff, South-East (Mr. Callaghan) I have come to the same conclusion as he did, that I cannot recommend the House to support the Clause. I proffer this advice rather sadly, because I recognise the purpose and intention which are admirable. The Clause also has the rare distinction, judging from the Notice Paper, of having attracted the unanimous, or nearly unanimous, support of the Liberal Party.
When he moved the Motion the hon. Member for Huddersfield, West (Mr. Wade) gave a broad hint—which he amplified later—that this was not the new Clause which he would have moved had he felt free to do so. The hon. Gentleman made abundantly clear that his sympathies were with a Clause in the form tabled last year by his hon. Friends, which would have made preservation of rights a condition of Inland Revenue approval of pension schemes. That, Mr. Speaker, you ruled was not in order on that occasion and the hon. Member for Huddersfield, West—no doubt wisely-apprehended that you might so rule again this year. Therefore, I sympathise with


him that, in endeavouring to find a peg on which to hang an argument on a subject of major importance, he has had to put forward a proposal which, I must tell the House, cannot, I think, stand up.
May I, as hon. Members preceding me have done, say a word or two about the intention before coming to what seems to me the fallibility of the method. For a number of years I have had an interest in this question of promoting the preservation of rights and transferability of benefits in private pension schemes. I would remind the hon. Member for Huddersfield, West, that one of the major advances in the spread of preservation and transferability in private schemes flows from the National Insurance Act, 1959.
It was a condition of contracting out—a condition deliberately put into the Act—that if a scheme was to be contracted out it must, in one way or another—either by transfer payments, payments in lieu or by providing a frozen pension—preserve at least up to the level of what the person concerned could have earned had he been in the State scheme for the same period. As a consequence, for about 4¾ million people at present contracted out under the 1959 Act there exists some form of preservation in respect of that section of their pension rights.

Mr. Wade: I am sure that the right hon. Gentleman will agree that in terms of money values that is only a very limited proportion of the total money provided by superannuation schemes.

Mr. Boyd-Carpenter: Certainly, and probably quite a small proportion, but it has introduced this principle, or concept, of preservation into a very large number of private schemes. While it is obligatory, as a condition of contracting out, to preserve up to the equivalent of what might be earned in a State scheme, it provides some measure of encouragement to go further.
I think that I am right in saying that approval of the 1959 Act gave the biggest impetus provided so far for the spread of preservation among private schemes. I am very far from being satisfied that it has gone anything like far enough. There is a great distance still to go. I should like to see any sensible and workable provision which gave further encouragement,

were it possible to devise such a provision. I should not at this stage want to rule out the possibility of some fiscal method.

Mr. Merlyn Rees: I am interested in the point about the concept of preservation which came about in private schemes because of the 1959 Act. Does the same concept affect people who have opted out of the scheme because they are in local government employ? Do local government authorities have to apply the same concept as people in private schemes?

Mr. Boyd-Carpenter: My recollection is that they do. I understand that if someone is in a local government scheme and leaves that employment, as a matter of general practice, a local authority complies with the Act of 1959 by a payment in lieu into the national scheme.
This Clause has a serious defect in that it applies only to funds approved under Section 379 of the Income Tax Act, 1952, and not Section 388. As was said by the hon. Member for Cardiff, South-East, normally, if a scheme is approved by the Inland Revenue, the contribution of the employer ranks 100 per cent. as an allowable expense for tax purposes. It would seem unlikely that any employer would alter his arrangements for 1 per cent. of his contribution to his pension scheme.
That would seem the more so when one recalls that the introduction of preservation into a private scheme costs the scheme a substantial amount, because it does not gain the savings of at least the employer's contribution which otherwise comes in when an employee leaves.
6.30 p.m.
Thirdly, it is not at all clear what benefits, 1o quote the new Clause, would have to be preserved to earn this additional 1 per cent. allowance for tax purposes. The hon. Member said that a cash option would not satisfy that, but he has to face a very difficult problem. Many progressive schemes give three choices, a frozen pension, transfer payment, or repayment in cash. It is the unhappy experience of many firms that the great majority of employees who leave opt for the cash payment. If the proposal were to act at all effectively it would have to apply to schemes which did not give that option, namely, to


schemes where there was no option to take a repayment at the discretion of the employee and where he could receive only a frozen pension or transferability payment into the new scheme.
That is a very substantial matter, involving relations between employer and worker. I doubt very much whether a 1 per cent. tax repayment would have the effect of making the employer want to take that step, or whether it would be agreeable to many employees. It is true that there are still fairly severe restrictions, but the tendency is towards relaxation. Nowadays a public servant, unlike Lord Beveridge's experience, when he leaves and is over 50, has his frozen payment available at 60.
I announced the other day in the House a modest advance in respect of people leaving the Civil Service at a younger age. There is a tendency towards relaxation. I do not think it right to expect the public service to be too far ahead of the practice of the best private employers, but I claim that we have set a good example in this respect.
What is the best method of handling this matter? As the House knows, the National Economic Development Council is very concerned about it from the point of view of mobility of labour as well as social justice. As has been said, following those discussions the Government Actuary has been asked to produce a further report on private schemes. Some years ago he produced an extremely useful one which helped us very much in our consideration of the 1959 Act. I am sure that it will be valuable to have that review brought up to date.
Here, I think we come to the nub of the matter, the clash between the pension development concept held by the hon. Member for Cardiff, South-East and the concept which I, the hon. Member for Huddersfield, West and certainly my hon. Friend the Member for Bradford, West (Mr. Tiley) hold. We want to see the private schemes developing and expanding and covering an ever larger part of the working population as a complement to the State scheme. We do not want to see a universal State scheme or the nationalisation of provision for old age.
Those of us who take that view, however, must face the fact that unless increased preservation and transferability come about in the private sector it will be more difficult to defend it against the onslaughts of the State scheme because, whatever the merits or demerits the State scheme on a reasonable basis might have—and this is not the time to debate them, there will be other occasions for mat—we must agree that it has certain advantages in respect of transferability.

Mr. Houghton: Would the right hon. Gentleman call his 1959 Act an onslaught?

Mr. Boyd-Carpenter: The hon. Member for Sowerby (Mr. Houghton) apparently so regarded it at the time, because his reaction to the onslaught was not only vigorous, but, if I recall correctly the length of the Committee stage, it was prolonged. However, if we seek to debate the 1959 Act again I fear that we shall incur your displeasure, Mr. Speaker.

Mr. Callaghan: It is not just that it provides for mobility, but that it is universal. What many of us fear, without having any particular prejudice, is that we can never devise private schemes which can be universal. It will be the employees who are worst paid who are excluded.

Mr. Boyd-Carpenter: It is a mistake to under-rate the expansion that private schemes can reach, but I fear that you, Mr. Speaker, would not permit us to debate this fascinating topic, much as I should like to argue it for a considerable time.
The relevance of the new Clause is that if we are to see the proper development of the private schemes and their continuance and success against the challenge which the hon. Member for Cardiff, South-East represents, I am quite sure that we want to see as a necessary condition a great development in preservation of rights and of transferability on leaving employment. Because that is the reason behind the new Clause I am particularly sorry to have to advise the House that it would not have that effect. But the object of greater development of preservation which I have been seeking to describe is


a matter which the Government regard as of importance and which we should seek to forward.

Mr. Wade: I think that I have already made it clear that, had I been free to devise the kind of Clause I should like, the Clause on the Notice Paper would have been worded somewhat differently from the one we have been discussing. For that reason I do not propose to press this Motion to a Division.
I am a little disappointed that the right hon. Gentleman has not been able to give us any clear indication about what the Government intend to do. I should like to have introduced some very radical reforms in the State scheme. It is essential that the State scheme should be coupled with some form of private superannuation scheme. That would fail unless there were a better method of enabling employees to carry their pension rights with them as they moved from job to job or unless there were some assurance that their pension rights would be preserved so that they would have a pension when they retired under such a private superannuation

scheme. The sooner something is done about that the better.

I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

Mr. Speaker: I understand that it is proposed formally to divide on new Clause No. 6.

New Clause No. 6.—(INCOME TAX: INCREASE OF SMALL INCOME RELIEF.)

(1) In section 15 of the Finance Act 1952 (small income relief), as amended by section 12 (6) of the Finance Act 1963, for the reference in subsection (1) to £450 (maximum income for full relief) and the corresponding references in subsection (2) there shall be substituted references to £500; and in the said subsection (2), as so amended, for the reference to £680 (the limit for marginal relief) there shall be substituted a reference to £750.—[Mr. Callaghan.]

Brought up, and read the First time.

Motion made, and Question put, That the Clause be read a Second time:—

The House divided: Ayes 171, Noes 213.

Division No. 122.]
AYES
[6.38 p.m.


Ainsley, William
Driberg, Tom
Johnson, Carol (Lewisham, S.)


Alldritt, W. H.
Edwards, Rt. Hon. Ness (Caerphilly)
Jones, Elwyn (West Ham, S.)


Allaun, Frank (Salford, E.)
Edwards, Robert (Bilston)
Kenyon, Clifford


Allen, Scholefield (Crewe)
Edwards, Walter (Stepney)
Key, Rt. Hon. C. W.


Awbery, Stan (Bristol, Central)
Evans, Albert
King, Dr. Horace


Beaney, Alan
Finch, Harold
Lawson, George


Bence, Cyril
Foot, Dingle (Ipswich)
Lee, Frederick (Newton)


Bonn, Anthony Wedgwood
Foot, Michael (Ebbw Vale)
Lever, L. M. (Ardwick)


Benson, Sir George
Forman, J. C.
Lewis, Arthur (West Ham, N.)


Blackburn, F.
Fraser, Thomas (Hamilton)
Loughlin, Charles


Blyton, William
Galpern, Sir Myer
Lubbock, Eric


Boardman, H.
George, Lady Megan Lloyd (Crmrthn)
Mahon, Dr. J. Dickson


Boston, T. G.
Glnsburg, David
McBride, N.


Bottomley, Rt. Hon. A. G.
Gordon Walker, Rt. Hon. P. C.
MacColl, James


Bowden, Rt. Hn. H. W. Leics, S. W.)
Gourlay, Harry
McInnes, James


Bowen, Roderic (Cardigan)
Greenwood, Anthony
McKay, John (Wallsend)


Bowles, Frank
Grey, Charles
Mackenzie, Gregor


Braddock, Mrs. E. M.
Griffiths, David (Rother Valley)
McLeavy, Frank


Bradley, Tom
Griffiths, Rt. Hon. James (Llanelly)
MacPherson, Malcolm


Bray, Dr. Jeremy
Grimond, Rt. Hon. J.
Mallalieu, E. L. (Brigg)


Brockway, A. Fenner
Hale, Leslie (Oldham, W.)
Mallalieu, J. P. W. (Huddersfield, E.)


Broughton, Dr. A. D. D.
Hamilton, William (West Fife)
Manuel, Archie


Brown, Rt. Hon. George (Belper)
Hannan, William
Mapp, Charles


Butler, Herbert (Hackney, C.)
Harper, Joseph
Mason, Roy


Callaghan, James
Hart, Mrs. Judith
Mayhew, Christopher


Castle, Mrs. Barbara
Hayman, F. H.
Mendelson, J. J.


Chapman, Donald
Henderson, Rt. Hn. Arthur (Rwly Regis)
Millan, Bruce


Collick, Percy
Herbison, Miss Margaret
Mitchison, G. R.


Craddock, George (Bradford, S.)
Hill, J. (Midlothian)
Monslow, Walter


Cronin, John
Hilton, A. V.
Moody, A. S.


Crosland, Anthony
Holman, Percy
Morris, Charles (Openshaw)


Dalyell, Tam
Holt, Arthur
Morris, John (Aberavon)


Darling, George
Houghton, Douglas
Moyle, Arthur


Davies, S. O. (Merthyr)
Howell, Denis (Small Heath)
Noel-Baker, Francis (Swindon)


Deer, George
Hoy, James H.
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Delargy, Hugh
Hughes, Cledwyn (Anglesey)
O'Malley, B. K.


Dempsey, James
Hughes, Emrys (S. Ayrshire)
Owen, Will


Diamond, John
Hughes, Hector (Aberdeen, N.)
Padley, W. E.


Dodds, Norman
Hunter, A. E.
Pannell, Charles (Leeds, W.)


Doig, Peter
Hynd, H. (Accrington)
Paton, John


Donnelly, Desmond
Hynd, John (Attercliffe)
Pavitt, Laurence




Pearson, Arthur (Pontypridd)
Skeffington, Arthur
Watkins, Tudor


Pentland, Norman
Slater, Joseph (Sedgefield)
Weitzman, David


Prentice, R. E.
Small, William
White, Mrs. Eirene


Price, J. T. (Westhoughton)
Smith, Ellis (Stoke, S.)
Whitlock, William


Probert, Arthur
Snow, Julian
Wilkins, W. A.


Rankin, John
Sorensen, R. W.
Willey, Frederick


Rees, Merlyn (Leeds, S.)
Steele, Thomas
Williams, W. T. (Warrington)


Rhodes, H.
Stones, William
Willis, E. G. (Edinburgh, E.)


Roberts, Albert (Normanton)
Strauss, Rt. Hn. G. R. (Vauxhall)
Wilson, Rt. Hon. Harold (Huyton)


Roberts, Goronwy (Caernarvon)
Stross, Sir Barnett (Stoke-on-Trent, C.)
Winterbottom, R. E.


Robertson, John (Paisley)
Taylor, Bernard (Mansfield)
Woodburn, Rt. Hon. A.


Rodgers, W. T. (Stockton)
Thornton, Ernest
Woof, Robert


Ross, William
Timmons, John
Yates, Victor (Ladywood)


Shinwell, Rt. Hon. E.
Tomney, Frank
Zilliacus, K.


Short, Edward
Wade, Donald



Silkin, John
Wainwright, Edwin
TELLERS FOR THE AYES:


Silverman, Julius (Aston)
Warbey, William
Mr. Charles A. Howell and




Mr. Redhead.




NOES


Agnew, Sir Peter
Fell, Anthony
Maitland, Sir John


Allan, Robert (Paddington, S.)
Fisher, Nigel
Markham, Major Sir Frank


Allason, James
Fletcher-Cooke, Charles
Marples, Rt. Hon. Ernest


Anderson, D. C.
Fraser, Ian (Plymouth, Sutton)
Marshall, Sir Douglas


Arbuthnot, Sir John
Freeth, Denzil
Marten, Neil


Ashton, Sir Hubert
Galbraith, Hon. T. G. D.
Matthews, Gordon (Meriden)


Atkins, Humphrey
Gammans, Lady
Maude, Angus (Stratford-on-Avon)


Awdry, Daniel (Chippenham)
Gardner, Edward
Maudling, Rt. Hon. Reginald


Barber, Rt. Hon. Anthony
Gibson-Watt, David
Mawby, Ray


Barter, John
Giles, Rear-Admiral Morgan
Maxwell-Hyslop, R. J.


Beamish, Col. Sir Tufton
Gilmour, Ian (Norfolk, Central)
Maydon, Lt.-Cmdr. S. L. C.


Bell, Ronald
Glyn, Dr. Alan (Clapham)
Miscampbell, Norman


Bevins, Rt. Hon. Reginald
Goodhart, Philip
Montgomery, Fergus


Bidgood, John C.
Goodhew, Victor
Morrison, Charles (Devizes)


Biffen, John
Green, Alan
Morrison, John (Salisbury)


Biggs-Davison, John
Grosvenor, Lord Robert
Mott-Radclyffe, Sir Charles


Bingham, R. M.
Hall, John (Wycombe)
Neave, Airey


Birch, Rt. Hon. Nigel
Hamilton, Michael (Wellingborough)
Oakshott, Sir Hendrie


Bishop, Sir Patrick
Harris, Frederic (Croydon, N. W.)
Orr, Capt. L. P. S.


Bourne-Arton, A.
Harris, Reader (Heston)
Osborn, John (Hallam)


Box, Donald
Harrison, Brian (Maldon)
Page, John (Harrow, West)


Boyd-Carpenter, Rt. Hon. John
Harrison, Col. Sir Harwood (Eye)
Panned, Norman (Kirkdale)


Braine, Bernard
Harvie Anderson, Miss
Pearson, Frank (Clitheroe)


Bryan, Paul
Hendry, Forbes
Peel, John


Bullard, Denys
Hiley, Joseph
Percival, Ian


Bullus, Wing Commander Eric
Hill, Mrs. Evelyn (Wythenshawe)
Pickthorn, Sir Kenneth


Burden, F. A.
Hill, J. E. B. (S. Norfolk)
Pitt, Dame Edith


Butcher, Sir Herbert
Hirst, Geoffrey
Pounder, Rafton


Campbell, Gordon
Hogg, Rt. Hon. Quintin
Powell, Rt. Hon. J. Enoch


Chataway, Christopher
Holland, Philip
Price, David (Eastleigh)


Chichester-Clark, R.
Hollingworth, John
Prior, J. M. L.


Clark, Henry (Antrim, N.)
Hopkins, Alan
Prior-Palmer, Brig, Sir Otho


Clark, William (Nottingham, S.)
Hughes Hallett, Vice-Admiral John
Proudfoot, Wilfred



Hughes-Young, Michael
Pym, Francis


Cleaver, Leonard
Hulbert, Sir Norman
Redmayne, Rt. Hon. Martin


Cole, Norman
Hutchison, Michael Clark
Rees, Hugh (Swansea, W.)


Cooke, Robert
Iremonger, T. L.
Rees-Davies, W. R. (Isle of Thanet)


Cooper, A. E.
Irvine, Bryant Godman (Rye)
Ridley, Hon. Nicholas


Cooper-Key, Sir Neill
James, David
Roots, William


Cordeaux, Lt.-Col. J. K.
Johnson, Eric (Blackley)
Ropner, Col. Sir Leonard


Cordle, John
Johnson Smith, Geoffrey
Russell, Sir Ronald


Corfield, F. V.
Jones, Rt. Hon. Aubrey (Hall Green)
Seymour, Leslie


Costain, A. P.
Kaberry, Sir Donald
Sharples, Richard


Courtney, Cdr. Anthony
Kerans, Cdr. J. S.
Shaw, M.


Craddock, Sir Beresford (Speithorne)
Kerby, Capt. Henry
Skeet, T. H. H.


Crawley, Aidan
Kerr, Sir Hamilton
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Critchley, Julian
Kershaw, Anthony
Spearman, Sir Alexander


Curran, Charles
Lancaster, Col. C. G.
Stainton, Keith


Currie, G. B. H.
Leather, Sir Edward
Steward, Harold (Stockport, S.)


Dance, James
Legge-Bourke, Sir Harry
Stoddart-Scott, Sir Malcolm


d'Avigdor-Goldsmid, Sir Henry
Lewis, Kenneth (Rutland)
Storey, Sir Samuel


Digby, Simon Wingfield
Lilley, F. J. P.
Studholme, Sir Henry


Donaldson, Cmdr. C. E. M.
Litchfield, Capt. John
Tapsell, Peter


Doughty, Charles
Lloyd, Rt. Hn. Geoffrey (Sut' n' C'dfield)
Taylor, Sir Charles (Eastbourne)


Drayson, G. B.
Longden, Gilbert
Taylor, Edwin (Bolton, E.)


Duncan, Sir James
Lucas, Sir Jocelyn
Taylor, Frank (M'ch'st'r, Moss Side)


Eden, Sir John
Lucas-Tooth, Sir Hugh
Teeling, Sir William


Elliot, Capt. Walter (Carshalton)
McAdden, Sir Stephen
Thatcher, Mrs. Margaret


Elliott, R. W. (Newc'tle-upon-Tyne, N.)
MacArthur, Ian
Thomas, Sir Leslie (Canterbury)


Emery, Peter
McLaren, Martin
Thompson, Sir Kenneth (Walton)


Emmet, Hon. Mrs. Evelyn
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs)
Thompson, Sir Richard (Croydon, S.)


Errington, Sir Eric
MacLeod, Sir John (Ross &amp; Cromarty)
Thornton-Kemsley, Sir Colin


Farey-Jones, F. W.
Macmillan, Maurice (Halifax)
Tiley, Arthur (Bradford, W.)


Farr, John
Maginnis, John E.
Tilney, John (Wavertree)







Touche, Rt. Hon. Sir Gordon
Walker-Smith, Rt. Hon. Sir Derek
Wilson, Geoffrey (Truro)


Turner, Colin
Wall, Patrick
Wolrige-Gordon, Patrick


Turton, Rt. Hon. R. H.
Webster, David
Woodhouse, Hon. Christopher


Tweedsmuir, Lady
Wells, John (Maidstone)
Woodnutt, Mark


van Straubenzee, W. R.
Whitelaw, William
Woollam, John


Vaughan-Morgan, Rt. Hon. Sir John
Williams, Sir Rolf Dudley (Exeter)
Worsley, Marcus


Vickers, Miss Joan
Williams, Paul (Sunderland, S.)



Walker, Peter
Wills, Sir Gerald (Bridgwater)
TELLERS FOR THE NOES:




Mr. Batsford and Mr. More.

New Clause No. 8.—(INFORMATION AS TO ESTATE DUTY SCHEMES.)

(1) The following provisions of this section shall have effect to provide information for determining whether, and in what form and to what extent, it is expedient to amend the law in order to prevent avoidance of estate duty.

(2) Where it appears to the Commissioners of Inland Revenue that a person at any time during the calendar year 1964 has been or may reasonably be supposed to have been a party to an estate duty scheme or engaged in the advertisement of an estate duty scheme, the Commissioners may by notice in writing require that person to furnish them within such time as they may direct (not being less than twenty-eight days) with such particulars as they think necessary for the purpose of determining the nature, purpose and effect of the scheme and whether and to what extent it has resulted or will result in the avoidance of estate duty.

(3) In this section—
(a) the word "advertisement" refers to an offer, invitation or inducement by letter or other written communication or in a newspaper (so, however, that in relation to an advertisement in a newspaper the words "engaged in" refer only to the person or persons who procured the advertisement to be inserted);
(b) the phrase "estate duty scheme" means a transaction or series of transactions, the purpose or a main purpose of which is and the effect of which is or will be, contingently or otherwise, to avoid or reduce estate duty payable on the death of any individual or in relation to any group or class of individuals; and, without prejudice to the generality of the foregoing words, such a transaction may consist of or comprise a settlement (within the meaning attributed to that word by subsection (2) of section 411 of the Income Tax Act 1952), a contract for an annuity payable during a term of years or for a life or joint lives or a contract of insurance;
(c) in relation to a transaction which consists of or comprises a contract for an annuity or a contract of insurance, the phrase "a party to" includes not only the grantor and grantee of the annuity, the insurer and the assured, but also a broker procuring the contract.—[Mr. Mitchison.]

Brought up, and read the First time.

Mr. Mitchison: I beg to move, That the Clause be read a Second time.

This is a Clause on the useful model set by the Government for the purpose of

obtaining information, in this case not about tax evasion but about lawful tax avoidance, in the matter of Estate Duty. The Estate Duty schemes referred to in the Clause are schemes which have as one of their main purposes and as their effect the avoidance of Estate Duty. The definition is wide and the scope of the Clause itself is wide, because it is directed to obtaining information not only from those who are parties to these schemes but from those who advertise them.

There has never been a case where one could move a Clause with more conviction of its need, and when one could be more certain that a Tory Government would infallibly reject it. Dismissing for the moment the latter consideration from my mind, I must call the attention of the House to what hon. Members know full well, that extensive avoidance of Estate Duty is going on.

Let us be clear what is meant. Many schemes have perfectly good objects. One of their results may be the avoidance of Estate Duty. Therefore, one is not in a position to say at present that every one of these schemes constitutes an avoidance, but one is in a position to say that this is a matter which merits early inquiry and upon which the information available to the Government cannot be sufficient, for the simple reason that, as soon as any legislative provision is directed to Estate Duty, a corresponding change comes in the schemes designed to avoid payment of that duty.

The effect of avoiding Estate Duty is much the same as the effect of avoiding any other tax. It means that other taxpayers have to pay more. The people who suffer in the long run are not some abstract body called "the Revenue", but the people who pay taxes; and taxes run together, in the sense that the total revenue the Government require from year to year comes from a whole variety of them, of which Estate Duty is by no means the least important.

I do not think that there can be a single Member who is practising as a


solicitor, or has practised as a solicitor, or who is practising as an accountant, or has practised as an accountant, who does not know full well that a very considerable slice of his professional time is devoted just to this purpose, that of devising schemes for avoiding Estate Duty.

I went to the Library and extracted from it "Morcom, Estate Duty Saving". This is the second edition and there is a supplement to keep it up-to-date. I do not say that the Government do not go on trying, but it so happens that the book does not contain any anti-avoidance provisions. The first edition I appear to have referred to, to judge from a footnote in the second edition.

May I reassure right hon. and hon. Gentlemen?; I shall not give them a number of tips as to how to avoid Estate Duty. They can work that out for themselves. I shall not trouble them with elaborate details, but I must make the picture clear, not only to them, but to numbers of others all over the country who pay the full run of Estate Duty and do not regard it as what it has sometimes been described as—a voluntary tax. It is certainly not a voluntary tax to those in the lower range of contributors.

I shall quote from that very useful appendage to any book, the publisher's blurb. Nobody ever knows whether the publisher writes it or whether the author does. I think that the practice varies. This one is good and fruity:
'Morcom'"—

that is, the book—
provides the ideal guide to the savings which can be effected in regard to Estate Duty, for the taxpayer who is interested in minimising his commitments to the Inland Revenue.

I like the next sentence:
It also covers the avoidance of Surtax, Income Tax and the incidence of Stamp Duty.

It is no exaggeration after that to say:
This is essentially a practical book.

At the end there is this statement:
Most people today, whether they are very wealthy or of only moderate means"—

how moderate, I wonder—
consider it a wise policy to take advantage of the established fact that taxpayers are entitled to reduce their commitments to the Revenue so far as they honestly can.

Let me say at once that this new Clause has nothing to do with dishonesty. It is just a question of what limit ought to be put on honest avoidance.
To their legal and financial advisers, therefore, who are frequently required to advise on a policy of 'tax planning', this book will prove invaluable.

Tax planning, the House will observe, is by analogy with family planning. A couple who do not want more family have a bit of family planning. Someone who does not want to pay any more taxes has a bit of tax planning. The difference is that some members of the family are occasionally welcome, taxes only very rarely to the payer.

I repeat—I shall probably repeat it again—that this is not a case of people doing anything but using every legal device they can to pay the minimum of Estate Duty. The social injustice of it is, first, that there should be so many loopholes, and, secondly, that those loopholes are in practice open only to those who are fairly well off and obtain such skilled advice as is provided, not only in this book, but in the services of their professional advisers, to whom we are told the book will be most useful.

I want to quote one very short passage that Lord Simon once uttered. People frequently quote remarks by judges to the effect, quite rightly, that a person is entitled to take advantage of everything he can to pay as little tax as possible. Of course he is entitled to do that, but is that the real point? Lord Simon uttered these words in a case in 1943 about a Mr. Latilla. Lord Simon, then Lord Chancellor, said this:
My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income"—

this case was about Income Tax—
by which those who are prepared to adopt them might enjoy the benefits of residence in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however elaborate and artificial such methods may be, those who adopt them are 'entitled' to do so. There is, of course, no doubt that they are within their legal rights, but that is no reason why their efforts, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship.

I need go no further. That surely is the test that we must apply today. It is no logical defence to say that these things are legal, since what we are called upon to examine is whether the law should be altered. The existence of the kind of thing that is outlined in Morcom and mentioned in Lord Simon's speech is perfectly well known to the majority of Members. It ought not to go on, but it is no easy matter, and it will be no easy matter, to sort out in these cases motives of which I think we should all approve and motives which expose the taxpayer to the condemnation inherent in those words of Lord Simon, who, after all, had experience of both sides, the judicial side and the parliamentary side.

I shall not go into any of these schemes in detail. They are far too complicated and varied for that. However, I shall indicate the kind of way in which they work. One of them is in dealings with settlements. I need go no further than that into it. The settlements often have to be varied if the intention is to avoid Estate Duty.

7.0 p.m.

In 1958, we passed the Variation of Trusts Act and we left to the courts a very wide discretion to consent—on behalf of people who, for one reason or another were unable to consent—to the variation of trusts, provided they were of benefit to the person concerned. The courts, in the wholly proper exercise of their discretion in that respect, have consented to variations, the main purpose of which has been in some cases—I say some cases, but I should preface the phrase by saying that often it has been the sole purpose—to avoid Estate Duty.

That does not make the matter any more right. It merely means that the variation is a perfectly legal one. I hope that we will get this distinction clear and keep it clear all the time. There have been a number of cases of this, some in and some out of court, and there is one particular one to which I would like to refer the House because it involves the sort of broad question we are now considering.

It concerned a tax case involving Pilkington and Another. It began with a short speech by Lord Reid who, like Lord Simon, had had experience both on the legislative side of Government and, of course, as a law lord. He said

at the beginning of his speech—having had the advantage of reading the speech delivered by Lord Radcliffe:
… I am reluctantly persuaded … to agree that Section 32 of the Trustee Act, 1925, can be applied to the present case. I do not think that it is disputed that the main purpose of the Appellant's scheme, and its main benefit to the infant … is avoidance of death duties and surtax.

Later, at the end of that judgment, he said:
I realise that this case opens a wide door and that many other trustees may seek to take advantage of it. But if it is thought that the power which Parliament has conferred"—

This was lot under the Variation of Trusts Act, but another power altogether
is likely to be used in ways of which Parliament does not approve, then it is for Parliament to devise appropriate restrictions of the power.

That seems to me to go not only for power expr2ssly conferred by Parliament but for other powers which are lawfully exercised now. We must judge whether we think it is likely to be used or is being used in ways of which the House does not approve.

I cannot believe that hon. Members on either side of the House really believe that it is reasonable to oblige the courts to support a scheme, the main purpose of which is the avoidance of death duties and Surtax. That is how Lord Reid described that scheme. Nor is it any the less our duty to amend it when not only has it that purpose in itself but when it is going, in his words, to "open the door" to other similar cases.

We are not here merely to say that the law has existed for a long time and that this or that Amendment of it cannot be made. We are here to look at the present position to see, in the light of the information required for the purpose, whether the time has not come to make other changes. The question then is, have we really got enough information about it?

There is one other type of case to which I wish to refer. I have been talking about settlements, the exercise of powers and so on, but policies under the Married Women's Property Acts are no doubt a perfectly proper provision in many cases. They can, however, be used by way of avoiding Estate Duty to an extent which I believe was never intended when the legislation was originally passed. Not only those policies but others, too,


for, even if the kind of thing I have described in the simplest of terms has now to some extent been limited, the inherent difficulty of it still exists.

Consider the man who proposes to avoid, as much as he can, the payment of Estate Duty and, at the same time, to maintain his own income. Let us suppose that he takes out a policy—in the case I have been supposing, for the benefit of his wife under the Married Women's Property Acts. He pays a single premium and, for that purpose, he borrows from the bank so that against his income he can set the charges of that loan. I agree that to some extent this has been met, but whether it has been met sufficiently is doubtful.

If that is the position, he may well succeed in having no smaller income and, at the same time, leaving his successors with far less Estate Duty to pay. I am not saying that this is always wrong; merely that when there are loopholes of this character they should be the subject of a general investigation which, so far as I know, has never been made. I am not even saying that there is not some power to make it; just that there is not enough, although when a case comes to court one gets a fairly thorough investigation. Thus there is power in an Estate Duty case, although it is rarely exercised, to make such an investigation.

Such power was exercised once, in the case of one of our dukes. Estate Duty avoidance seems to be rather a ducal malady. Witnesses may be heard and everything gone into, but it is rather like what my hon. Friends and I always used to say about free milk in schools; we declared that we could never get it out of a Tory council until the children's physical condition showed signs that their health was suffering. These cases which come to court are cases where, successfully or unsuccessfully, there has been a fairly stiff Estate Duty avoidance, or an attempt to avoid, and where the Revenue, because it has considered the matter doubtful, has brought or fought the case.

I am sorry to tell the right hon. Gentleman the Chief Secretary, for whom I have the highest personal regard, that I shall simply not believe him if he tells me that there is no extensive avoidance of Estate Duty now. I do not

think he will say that. He will probably attempt to justify it or to say that whatever it is it does not need further investigation. That cannot be right, either, because if one considers the cases of policies one finds that this single premium business has resulted in an agreement being reached among the insurance companies to the effect that they will not issue single premium policies in certain cases beyond £1,000.

One should not have to rest public morality and the fair incidence of taxation on an agreement between insurance companies. It is our business to provide for that kind of thing, and I was amused at the commentary on this aspect of the matter in the book to which I referred, where it is stated on page 187:
However rules observed by United Kingdom assurance companies preclude them accepting premiums for such policies in excess of £1,000".

The next sentence amused me:
It would be possible to secure a single premium policy for a larger sum from a non-U.K. assurance company or several single premium policies from several United Kingdom companies.

This is, according to the publisher's blurb, a practical book. When one is driven to that kind of practice and comment one is driven to it because it is recognised that what is going on is unsound and unfair and that someone does not want to drag it too much into the open. One finds it concealed in that unsatisfactory way—and these agreements are capable of evasion or avoidance, as are statutory provisions, and they are usually called "gentlemen's agreements" for that reason.

I want to refer to one other aspect of this matter. We are dealing with something that we all of us know about, or most of us know about. It is a field where it is singularly difficult to decide between what is right, proper and fair in the interests of the family and is not, at the same time, unfair to the community; and, on the other hand, cases where, whatever element of good intention there may be towards the family, the intention and certainly the result of it is the avoidance of Estate Duty, which is most unfair to one's fellow taxpayers.

When we are dealing with a question of that kind, we must first get our information right. I would agree at once that it is not easy to collect information,


partly because of the variety of the schemes and partly because of the mixture of motives that will certainly be found in most of them. I do not say that the mere fact that one of the purposes is the avoidance of Estate Duty necessarily condemns the scheme. I am saying that that and other schemes must be examined in conjunction, because this is a matter where it is the duty of the House to get information and ultimately, when it has got it, to frame a policy and put it into legislative form. It has gone beyond something which is capable of being dealt with by a little bit of patchwork here and there and it wants looking at as a whole.

I feel certain that hon. Members on both sides of the House will see that we have a duty in this matter and that it is not to be pushed aside by saying, "Well, this case or that case may be all right and this or that case may be all wrong." It is a case where we have to come to a decision of a public and general character, as I see it, and to do it on full information. This Clause involves no decision; it contains no penalties; it merely empowers the collection of information. I have enough confidence in people to believe that if it is passed the majority at any rate will give the information that they are called upon to give under this Clause.

Therefore, I in no sense regard it as oppressive. It obtains this information over a limited period of time. The limit in the Clause is the year that ends at the end of this calendar year. There is no question of retrospective legislation when one is collecting information. We have to go back to some extent to collect it, of course, but I think that is quite a good time limit. Here I will allow myself to be quite immoderate. I have been scrupulously moderate before. We shall have a Labour Government by then and I think that this information will be available in time for a Labour Chancellor to make proper use of it. I doubt whether any Tory Chancellor ever would or will.

Sir Henry d'Avigdor-Goldsmid: When listening to the hon. and learned Member for Kettering (Mr. Mitchison) I was strongly reminded that we have come to a very late stage in

the proceedings on this Bill without having had any mention of Estate Duty. I felt that, with so many special initiatives required from his party, certainly a dig at Estate Duty would arrive before long. Well, it has arrived.
7.15 p.m.
Frankly, I do not see any merit whatsoever in this new Clause for the purpose for which it is designed. The hon. and learned Gentleman quoted at great length from published volumes information which is readily available. He mentioned matters of which almost every accountant or solicitor has a great deal of knowledge. Incidentally, I am surprised that his hon. Friend the Member for Gloucester (Mr. Diamond) s not with him, because I am sure that he would have been able to confirm me in these views. Therefore, if the purpose of this Clause is to get information, it is quite useful because the information is already there. I see that its scope is limited to 1964. Such information as would be available in 1964 would, in the usual way of things, be out of date in some respects by 1965. So, frankly, I do not think that the Clause stands simply as an inquiry.
What it does, of course, is to give the hon. and learned Gentleman a peg for a discourse about Estate Duty and its avoidance, a subject which Chancellors in the past have frequently had to deal with. I appreciate that the Opposition are not able to propose taxation, otherwise it would have been much more satisfactory if, instead of having this debate, we had had a discussion on the taxation of gifts inter vivos. I think that then we should have had an interesting and revealing discussion on which certain views would have been taken. In fact, we have not had such a discussion. All we have had is an opportunity for the hon. and learned Gentleman to cast a good deal of innuendo and, without framing the charges, a slur on all those who treat in these matters.
I, for my sins and to my infinite regret, have had several dealings with the Estate Duty Office and with Estate Duty legislation as well. I have had to fight a case all the way up to the House of Lords, which, I believe, has resulted in an improvement of the law—and I have never beer told at any time that such action as I was taking was contrary to


the public interest or not in fulfilment of one's duty of citizenship.
This Clause will not in fact be a peg for a Labour Chancellor because there will not be a Labour Chancellor, and if we are unwise enough to accept it it will not be worth the paper that it is written on. This information is readily, completely and fully available to the Commissioners if they want it. The hon. and learned Gentleman has that information, too, and therefore I hope that I shall not be speaking out of turn if I suggest that there is no place in a Finance Bill for a Clause which serves no useful purpose whatsoever.

Mr. Boyd-Carpenter: The hon. and learned Member for Kettering (Mr. Mitchison) has the agreeable gift of being able to propound with the air of utmost moderation and reason really the most monstrous propositions. I have rarely seen that very powerful Parliamentary gift more effectively exercised than this evening when he presented this Clause to us as a moderate, reasonable, little proposal which, he added, none the less no Tory Government would accept. If one looks at the Clause one sees that it is a very striking one and goes a very long way indeed.
The hon. and learned Gentleman sought to confer credit on it by saying that it followed the pattern of the one in last year's Finance Bill in respect of betting and gaming. But, if this is a descendant of that Clause, it is certainly a bastard one because, as I say, this new Clause goes a very long way indeed. It would empower the Inland Revenue in any case where it appeared that either a citizen was making arrangements or a professional man was assisting him in making arrangements which could result in avoidance, not evasion, of Estate Duty, to serve notice demanding very detailed particulars both from the person and from his professional adviser.
Then this proposal has the odd feature, to which I will come later—and the hon. and learned Member forgot his air of reason and moderation for a moment when he explained it—that it would operate only during the year 1964.

Mr. Mitchison: I am sure that the right hon. Gentleman does not want to misrepresent me or the Clause. The Clause is not drawn so as to oblige professional

advisers to disclose their clients' affairs. I have watched this carefully, and if the right hon. Gentleman looks he will discover that to be the case. Secondly, if the Revenue has all this information already, then it does not seem to matter very much what the contents of the new Clause are.

Mr. Boyd-Carpenter: On the second observation of the hon. and learned Member, I take the point that it matters a very great deal. I should have thought that it was basic to our system of Government that one did not arm Government Departments with interrogatory powers save where there was an overwhelming case for them. To say lightheartedly that if the Revenue knows this already it does not matter is a quite startling observation from the hon. and learned Gentleman.
As to the hon. and learned Member's observation that it is not the intention of the new Clause that professional advisers should be compelled to disclose their clients affairs, I take it from him that that is the case. Whether it would be the effect I take very serious leave to doubt. There is a very clear indication to me that it would involve the professional advisers or those engaged in the advertisement of an Estate Duty scheme—

Mr. Mitchison: Solicitors do not advertise.

Mr. Boyd-Carpenter: No, but the hon. and learned Gentleman referred to people engaged in the advertisement of an Estate Duty scheme. Let us assume that someone responds to that advertisement. As I read the new Clause, the person who had advertised the scheme or who was advising a person who had responded to the advertisement would, under the new Clause, be liable to disclose his client's affairs. I give the hon. and learned Member the credit for having sought to avoid what he and I, as members of the same profession, would regard as an outrageous thing, namely, to impose on a professional adviser the duty to disclose affairs divulged to him in confidence by a client. But I doubt the hon. and learned Member's success in the situation which I have described.
The new Clause goes extremely wide. The definition of an Estate Duty scheme


in subsection (3,b) of the new Clause is very wide. It says:
… the purpose or a main purpose of which is and the effect of which is or will be, contingently or otherwise, to avoid or reduce estate duty payable on the death of any individual …".
The hon. and learned Member stated very fairly that this was aimed not at fraud or evasion but only at lawful avoidance. It falls on the hon. and learned Gentleman to satisfy the House that it is plainly necessary for that purpose, because I am sure that the House would take the view that we should not without reason give a Government Department these very considerable powers to inquire into the personal affairs of the citizen.
Estate Duty is reduced or avoided by all sorts of means. The simplest way that one can do it is by giving a present to one's child and then living for a further five years. That is the kind of transaction which apparently would come within the scope of this interrogatorial Clause. I say to the hon. and learned Member sincerely that there is no necessity for it.
As my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, the nature of these schemes is perfectly well known. Indeed, the hon. and learned Member read from a book about them. I would quote to him the words of one of the greatest men of his own party," Why peer into the crystal if you can read the book?". Why take interrogatory powers over the citizen when it is all in a booklet to which the hon. and learned Gentleman gave an admirable commercial advertisement, which no doubt will greatly expand its sales?
The question is not one of finding out the nature of these schemes. It is, in all seriousness, the difficult problem of judging in respect of which of them it is right to take action. One has to weigh the interest of the other citizens and the taxpayer against the hardship to individuals and interference with individuals' affairs which is involved in legislation. It is sometimes a very difficult exercise in judgment, but one is not spared that exercise in the slightest by this method of obtaining information which is already available. It does not help to resolve that problem.
The Government have not hesitated, when they have seen that there has been avoidance of a serious character, to take action in successive Finance Bills. Last year we legislated to tighten up the position in the light of a court decision on gifts in consideration of marriage, which the hon. and learned Member will recall. In the previous year we legislated to bring foreign immovables within the scope of Estate Duty. That case illustrates my point that such decisions as these are, and have to be, taken on a balance of the general desirability of supporting the Revenue as against the hardship which can be caused to individuals, for that provision in the 1962 Act resulted in the departure from his home and from this country of a very distinguished member of another place who has rendered very great services throughout his long life to this country.
I return to the point of principle. If information is sought to be obtained by these compulsory methods, the case that it cannot be obtained otherwise must be made out. No attempt has been made to make it out. The hon. and learned Member said that this was a voluntary tax. If it is, there seem to be a great many volunteers. The yield between 1951–52 and 1958–59 fluctuated between £160 million and £185 million a year. In 1963–64 it was £310 million. It has risen very substantially indeed.
I thought that the hon. and learned Member fell to temptation in the concluding moments of his speech and let the cat out of the bag by explaining that this provision, which one would have thought, if it were a good or normal one, might be permanent, was designed to run only to the end of 1964. He offered the controversial opinion, which he may live to regret, that by the end of that year there would be a Labour Government. I think that this gives the clue to what may be behind this Clause and certainly illustrates its dangers, for in that increasingly improbable contingency it would be very convenient to have these powers for the purpose, not of dealing with Estate Duty problems, but of introducing further extensions of taxation.
This proposal would be very helpful if the hon. and learned Member and his hon. Friends came to office and wanted


to introduce a gifts tax. Perhaps he will tell us whether it is the Labour Party's intention to introduce a gifts tax.

Mr. Mitchison: Mr. Mitchison rose—

Mr. Boyd-Carpenter: The hon. and learned Gentleman is about to try to tell us.

Mr. Mitchison: I will certaintly try.
The answer on that point, as on other questions of the avoidance of Estate Duty, is that we require further information. Perhaps the right hon. Gentleman will tell us which proposition he is putting forward—that this further information is unnecessary, or iniquitous, or both.

Mr. Boyd-Carpenter: I am putting forward the proposition that, in respect of Estate Duty, it is unnecessary and, therefore, iniquitous, but I am conceding to the hon. and learned Gentleman that this proposal would be very useful to a Labour Government if they wanted to introduce a gifts tax.
It is because it seems to me that this new Clause is founded, first on the false supposition that there will be a Labour Government and, secondly, on the supposition that it would be a right and fair thing to do, although hon. Members opposite are still very cagey about whether they really want to do it, that I ask the House to reject it.

7.30 p.m.

Mr. Douglas Jay: I am tempted to say that the Chief Secretary to the Treasury, in contrast to my hon. and learned Friend the Member for Kettering (Mr. Mitchison), has a habit of uttering the most vacuous platitudes with a great air of emphasis, vigour and passion. I will give a perfectly plain answer to his question about the Labour Party's intentions concerning a gifts tax, and that is that I am unable to anticipate my right hon. Friend's next Budget.
The hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Gold-smid) made a valid point when he said that we are always in some difficulty in these debates because it is not possible for anyone other than the Government to put down Amendments which involve an increase in taxation and therefore it is sometimes necessary to discuss important issues like this on the strength of Amendments

which have some effect other than that. But I do not think that the hon. Member or the Minister was on nearly such strong ground when both argued that we have this information already and therefore nothing more needs to be done about it. If the Government and the Inland Revenue have this information, why does this sort of thing go on? Do hon. Members opposite say that it does not go on, or do they say that although the Government have the information this practice nevertheless goes on? We are entitled to an answer.
It is right that the House in the course of debate on the Finance Bill should look at Estate Duty. The duty is important and extremely valuable, and whatever we may think about taxation on income, direct or indirect, if there is a strong case for taxation anywhere it is surely the case for a tax on inherited wealth. I do not think that the right hon. Gentleman would deny that we still have a very unequal distribution of property in the country, and the most effective instrument we have yet devised for combating that inequality is undoubtedly Estate Duty. This duty, over the past 66 years, has been fighting not a losing battle but a tough battle against the forces of private capital appreciation. On the whole, the evidence is that the duty has been very slowly, but only just, winning that battle.
I would not go as far as my hon. and learned Friend the Member for Kettering—if he said it—as to say that this is a voluntary tax, but it could easily become so if the Government do not take the sort of action that we are advocating today. On the other hand, it is not a tax so riddled with loopholes that Parliament should despair of it and give it up. It is true that Estate Duty up to 1959 was yielding a revenue of under £200 million, that it rose last year to £310 million, and that this is the Government's estimate for the coming year. I draw the moral from this that this is a tax exceedingly worth having and that we ought to be preserving it by closing up the loopholes.
Hon. Members opposite, and particularly the hon. Member for Walsall, South, argue that everything is known about it and that no further steps are necessary, and they challenge us to say why it is desirable to collect further


information on the subject. I content myself with quoting a document which was sent to me through the post, appropriately a few days before Budget day. This is a letter from a gentleman with an office in the City whose name I will not read out because the Chief Secretary accused my hon. and learned Friend the Member for Kettering of commercial advertising, but I will be glad to give it to him for the Inland Revenue.
This gentleman says:
Last year we wrote to inform you that there are many means by which you can lessen Estate Duty liability. Since that time over £270 million has been collected by the Treasury in death duties.
He was wrong. It was £310 million, which from his point of view was even worse.

Sir H. d'Avigdor-Goldsmid: Surely on this point of information it is open to the right hon. Gentleman's friends and his wealthy sympathisers to employ the same tactics as advised by the hon. Member for Cardiff, South-East (Mr. Callaghan) a fortnight ago for obtaining information from companies on how they spend their funds. If the right hon. Member wants this information he has enough rich and rich-seeming supporters to initiate a few inquiries. It might result in a useful harvest.

Mr. Jay: I do not want the information. I want to Inland Revenue to have it. My correspondent added:
If you look at the ' Wills ' columns in the newspapers, you may have noticed that some people seem to have attracted remarkably little duty in relation to the size of their estate.
This is true, and I wonder whether the Minister and the Inland Revenue have noticed it. He adds:
This desirable situation can be achieved, by wholly legal and ethical means, and it may well be possible at the same time to improve your own living standards. A reply form is incorporated in the enclosed brochure.
If literature of this kind is being widely circulated in the post, is not it reasonable to suppose that some people take advantage of it?
The brochure goes into further detail. Among other things it says:
So complex have the tax laws of this country become that each member of a group of people in similar financial circumstances may well pay quite a different amount in tax.

I hope that that is not true of other taxes, but in the writer's opinion it is true of Estate Duty because he says:
The same applies in an even greater degree to Estate Duty, due to the method by which this Duty is levied.
He then gets down to brass tacks and says:
To reduce the impact of Estate Duty it is necessary to find means of creating assets which do net bear duty or which bear duty at a lower rate than that applicable to the remainder or the Estate. There are various means by which this can be done, but it is important that any rearrangement fully safeguards the living standards and interests of the settlor.
It is then explained, as my hon. and learned Friend the Member for Kettering says, that life insurance is the most effective means whereby large estates bearing low rates of Estate Duty can be created and is the biggest factor in what this gentleman calls the rearrangement of Estate Duty. He offers his services in making arrangements of this kind on behalf of anybody who likes to avail himself of them. If all this information is being made available to the public—and the Minister knows that this is so—there is an obligation on the Government to take some action to prevent what is an apparently massive avoidance of this kind.
We often have quotations—and my hon. and learned Friend the Member for Kettering gave one—from learned judges who have said in the past that it is perfectly proper and honest for the individual citizen to minimise and lessen his tax liability. This is something which one cannot contest, but if we are to say that it is perfectly reasonable for a citizen to take any advantage of a loophole in the law, it is all the more clear that there is an obligation on Parliament to see that loopholes do not exist. If they exist, the spirit and intentions of Parliament are being frustrated because of accidents of which we then say the public are perfectly justified in taking advantage.
The Chief Secretary argued in favour of doing nothing about this that my hon. and learned Friend's proposals would have involved the collection of information and this would have meant the most tyrannical and oppressive inquisition into the affairs of ordinary people by compulsory means. He used the word


"compulsory" several times. Every Income Tax return involves an inquisition into our affairs in which all sorts of detailed answers have to be given. Surely, the Minister must know that the National Assistance Board asks all sorts of questions, quite properly, before paying out public money. Why is this kind of inquisition justifiable and acceptable in the case of Income Tax or the National Assistance Board but suddenly becomes a tyrannical interference with individual liberty when we are concerned

with death duty avoidance? That seems to me to be a most unconvincing argument.

The Minister's whole negative attitude when this kind of thing is plainly going on is exceedingly disappointing and I hope that unless he has something better to suggest, my hon. Friends will press the Amendment.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 163, Noes 207.

Division No. 123.]
AYES
[7.41 p.m.


Ainsley, William
Griffiths, David (Rother Valley)
O'Malley, B. K.


Alldritt, W. H.
Griffiths, Rt. Hon. James (Lanelly)
Oram, A. E.


Allaun, Frank (Salford, E.)
Grimond, Rt. Hon. J.
Owen, Will


Allen, Scholefield (Crewe)
Gunter, Ray
Padley, W. E.


Awbery, Stan (Bristol, Central)
Hale, Leslie (Oldham, W.)
Pannell, Charles (Leeds, W.)


Beaney, Alan
Hamilton, William (West Fife)
Paton, John


Bence, Cyril
Hannan, William
Pavitt, Laurence


Benn, Anthony Wedgwood
Harper, Joseph
Pearson, Arthur (Pontypridd)


Benson, Sir George
Hayman, F. H.
Pentland, Norman


Blackburn, F.
Henderson, Rt. Hn. Arthur (Rwly Regis)
Prentice, R. E.


Blyton, William
Herbison, Miss Margaret
Price, J. T. (Westhoughton)


Boardman, H.
Hilton, A. V.
Probert, Arthur


Bottomley, Rt. Hon. A. G.
Holman, Percy
Rankin, John


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Holt, Arthur
Redhead, E. C.


Bowen, Roderic (Cardigan)
Houghton, Douglas
Rees, Merlyn (Leeds, S.)


Bowies, Frank
Howell, Denis (Small Heath)
Rhodes, H.


Braddock, Mrs. E. M.
Hoy, James H.
Roberts, Albert (Normanton)


Bradley, Tom
Hughes, Cledwyn (Anglesey)
Roberts, Goronwy (Caernarvon)


Brockway, A. Fenner
Hughes, Emrys (S. Ayrshire)
Robertson, John (Paisley)


Broughton, Dr. A. D. D.
Hughes, Hector (Aberdeen, N.)
Rodgers, W. T. (Stockport)


Brown, Rt. Hon. George (Belper)
Hunter, A. E.
Ross, William


Butler, Herbert (Hackney, C.)
Hynd, H. (Accrington)
Short, Edward


Carmichael, Neil
Hynd, John (Attercliffe)
Silkin, John


Castle, Mrs. Barbara
Irvine, A. J. (Edge Hill)
Slater, Joseph (Sedgefield)


Chapman, Donald
Jay, Rt. Hon. Douglas
Small, William


Collick, Percy
Johnson, Carol (Lewisham, S.)
Smith, Ellis (Stoke, S.)


Corbet, Mrs. Freda
Jones, Elwyn (West Ham, S.)
Snow, Julian


Craddock, George (Bradford, S.)
Jones, T. W. (Merioneth)
Sorensen, R. W.


Cronin, John
Kenyon, Clifford
Steele, Thomas


Crosland, Anthony
Key, Rt. Hon. C. W.
Stones, William


Cullen, Mrs. Alice
King, Dr. Horace
Strauss, Rt. Hn. G. R. (Vauxhall)


Dalyell, Tam
Lawson, George
Stross, Sir Barnett (Stoke-on-Trent, C.)


Darling, George
Lee, Frederick (Newton)
Symonds, J. B.


Davies, Ifor (Gower)
Lever, L. M. (Ardwick)
Taylor, Bernard (Mansfield)


Davies, S. O. (Merthyr)
Lewis, Arthur (West Ham, N.)
Thornton, Ernest


Deer, George
Loughlin, Charles
Timmons, John


Delargy, Hugh
Lubbock, Eric
Tomney, Frank


Dempsey, James
Mabon, Dr. J. Dickson
Wade, Donald


Diamond, John
McBride, N.
Wainwright, Edwin


Dodds, Norman
MacColl, James
Warbey, William


Doig, Peter
McInnes, James
Watkins, Tudor


Driberg, Tom
McKay, John (Wallsend)
Weitzman, David


Edwards, Rt. Hon. Ness (Caerphilly)
McLeavy, Frank
Whitlock, William


Edwards, Robert (Bilston)
MacPherson, Malcolm
Wilkins, W. A.


Evans, Albert
Manuel, Archie
Willey, Frederick


Finch, Harold
Mapp, Charles
Williams, W. T. (Warrington)


Foot, Dingle (Ipswich)
Mason, Roy
Willis, E. G. (Edinburgh, E.)


Foot, Michael (Ebbw Vale)
Mayhew, Christopher
Winterbottom, R. E.


Forman, J. C.
Mendelson, J. J.
Woodburn, Rt. Hon. A.


Fraser, Thomas (Hamilton)
Millan, Bruce
Woof, Robert


Galpern, Sir Myer
Mitchison, G. R.
Yates, Victor (Ladywood)


George, Lady Megan Lloyd (Crmrthn)
Monslow, Walter



Ginsburg, David
Moody, A. S.
TELLERS FOR THE AYES:


Gordon Walker, Rt. Hon. P. C.
Morris, Charles (Openshaw)
Mr. Charles A. Howell and


Gourlay, Harry
Morris, John (Aberavon)
Mr. Grey.


Greenwood, Anthony
Moyle, Arthur





NOES


Agnew, Sir Peter
Anderson, D. C.
Awdry, Daniel (Chippenham)


Allan, Robert (Paddington, S.)
Ashton, Sir Hubert
Barber, Rt. Hon. Anthony


Allason, James
Atkins, Humphrey
Barter, John




Batsford, Brian
Grant-Ferris, R.
Osborn, John (Hallam)


Beamish, Col. Sir Tufton
Green, Alan
Page, John (Harrow, West)


Bell Ronald
Gresham Cooke, R.
Pannell, Norman (Kirkdale)


Bevins, Rt. Hon. Reginald
Griffiths, Eldon (Bury St. Edmunds)
Pearson, Frank (Clitheroe)


Bidgood, John C.
Grosvenor, Lord Robert
Peel, John


Biggs-Davison, John
Hall, John (Wycombe)
Percival, Ian


Bingham, R. M.
Hamilton, Michael (Wellingborough)
Pickthorn, Sir Kenneth


Bishop, Sir Patrick
Harris, Frederic (Croydon, N. W.)
Pitt, Dame Edith


Bourne-Arton, A.
Harris, Reader (Heston)
Powell, Rt. Hon. J. Enoch


Box, Donald
Harrison, Brian (Maldon)
Price, David (Eastleigh)


Boyd-Carpenter, Rt. Hon. John
Harvie Anderson, Miss
Prior, J. M. L.


Braine, Bernard
Heald, Rt. Hon. Sir Lionel
Proudfoot, Wilfred


Brooke, Rt. Hon. Henry
Henderson, Sir John (Cathcart)
Pym, Francis


Brown, Alan (Tottenham)
Hiley, Joseph
Ramsden, Rt. Hon. James


Buck, Antony
Hill, Mrs. Eveline (Wythenshawe)
Rawlinson, Rt. Hon. Sir Peter


Bullard, Denys
Hill, J. E. B. (S. Norfolk)
Redmayne, Rt. Hon. Martin


Bullus, Wing Commander Eric
Hirst, Geoffrey
Ridsdale, Julian


Burden, F. A.
Hocking, Philip N.
Roots, William


Campbell, Gordon
Hogg, Rt. Hon. Quintin
Ropner, Col. Sir Leonard


Carr, Rt. Hon. Robert (Mitcham)
Holland, Philip
Russell, Sir Ronald


Chataway, Christopher
Hollingworth, John
Scott-Hopkins, James


Chichester, Clark, R.
Hughes Hallett, Vice-Admiral John
Sharples, Richard


Clark, Henry (Antrim, N.)
Hughes-Young, Michael
Shaw, M.


Clark, William (Nottingham, S.)
Hulbert, Sir Norman
Skeet, T. H. H.


Cleaver, Leonard
Hutchison, Michael Clark
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Cole, Norman
Iremonger, T. L.
Spearman, Sir Alexander


Cooper, A. E.
Irvine, Bryant Godman (Rye)
Stainton, Keith


Cooper-Key, Sir Neill
James, David
Steward, Harold (Stockport, S.)


Cordeaux, Lt.-Col. J. K.
Johnson, Eric (Blackley)
Stoddart-Scott, Col. Sir Malcolm


Cordle, John
Johnson Smith, Geoffrey
Storey, Sir Samuel


Corfield, F. V.
Jones, Rt. Hon. Aubrey (Hall Green)
Studholme, Sir Henry


Costain, A. P.
Kaberry, Sir Donald
Tapsell, Peter


Courtney, Cdr. Anthony
Kerans, Cdr. J, S.
Taylor, Sir Charles (Eastbourne)


Craddock, Sir Beresford (Spelthorne)
Kerby, Capt. Henry
Taylor, Edwin (Bolton, E.)


Critchley, Julian
Kerr, Sir Hamilton
Taylor, Frank (M'ch'st'r, Moss Side)


Curran, Charles
Kirk, Peter
Teeling, Sir William


Currie, G. B. H.
Lancaster, Col. C. G.
Thatcher, Mrs. Margaret


Dance, James
Legge-Bourke, Sir Harry
Thomas, Sir Leslie (Canterbury)


d'Avigdor-Goldsmid, Sir Henry
Lewis, Kenneth (Rutland)
Thompson, Sir Kenneth (Walton)


Donaldson, Cmdr. C. E. M.
Lilley, F. J. P.
Thompson, Sir Richard (Croydon, S.)


Doughty, Charles
Litchfield, Capt. John
Thornton-Kemsley, Sir Colin


Douglas-Home, Rt. Hon. Sir Alec
Lucas-Tooth, Sir Hugh
Tiley, Arthur (Bradford, W.)


Drayson, G. B.
McAdden, Sir Stephen
Touche, Rt. Hon. Sir Gordon


du Cann, Edward
MacArthur, Ian
Turner, Colin


Duncan, Sir James
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs)
Turton, Rt. Hon. R. H.


Eden, Sir John
MacLeod, Sir John (Ross &amp; Cromarty)
Tweedsmuir, Lady


Elliot, Capt. Walter (Carshalton)
Macmillan, Maurice (Halifax)
van Straubezee, W. R.



Maginnis, John E.
Walder, David


Elliott, R. W. (Newc'tle-upon-Tyne, N.)
Maitland, Sir John
Walker, Peter


Emery, Peter
Markham, Major Sir Frank
Walker-Smith, Rt. Hon. Sir Derek


Emmet, Hon. Mrs. Evelyn
Marples, Rt. Hon. Ernest
Ward, Dame Irene


Errington, Sir Eric
Marshall, Sir Douglas
Webster, David


Farey-Jones, F. W.
Marten, Neil
Whitelaw, William


Farr, John
Matthews, Gordon (Meriden)
Williams, Sir Rolf Dudley (Exeter)


Fell, Anthony
Maude, Angus (Stratford-on-Avon)
Williams, Paul (Sunderland, S.)


Fisher, Nigel
Maudling, Rt. Hon. Reginald
Wills, Sir Gerald (Bridgwater)


Fletcher-Cooke, Charles
Mawby, Ray
Wilson, Geoffrey (Truro)


Fraser, Ian (Plymouth, Sutton)
Maxwell-Hyslop, R. J.
Wise, A. R.


Freeth, Denzil
Maydon, Lt.-Cmdr. S. L. C.
Wolrige-Gordon, Patrick


Galbraith, Hon. T. G. D.
Miscampbell, Norman
Woodhouse, Hon. Christopher


Gammans, Lady
Montgomery, Fergus
Woodnutt, Mark


Gardner, Edward
More, Jasper (Ludlow)
Woollam, John


Gibson-Watt, David
Morrison, Charles (Devizes)
Worsley, Marcus


Giles, Rear Admiral Morgan
Morrison, John (Salisbury)
Yates, William (The Wrekin)


Gilmour, Ian (Norfolk, Central)
Neave, Airey



Glyn, Dr. Alan (Clapham)
Oakshott, Sir Hendrie
TELLERS FOR THE NOES:


Goodhew, Victor
Orr, Capt. L. P. S.
Mr. McLaren and Mr. Hugh Rees.

New Clause 9.—(INCREASE OF PERSONAL RELIEF FOR CERTAIN HOUSEHOLDERS OVER 50 YEARS OF AGE.)

(1) If a claimant entitled to a deduction under paragraph (b) of subsection (1) of section 210 of the Income Tax Act 1952 (which paragraph provides for personal relief in any other case than that of certain married men) proves that throughout the year of assessment the claimant is over fifty years of age and occupies a dwelling as owner or tenant or occupies furnished accommodation, the deduction to be allowed to the claimant under the said section 210 shall be increased by an

amount equal to tax at the standard rate on one half of the difference between the sums mentioned respectively in the said paragraph (b) and in the preceding paragraph (a) (which makes corresponding provision in the case to which paragraph (b) does not apply).

(2) In the foregoing subsection "furnished accommodation" means a house or part of a house, occupied by virtue of a contract, to which the Furnished Houses (Rent Control) Act 1946 applies or would apply, if the appropriate order had been made under section 1 of that Act (application of Act by order of Minister) or if section 12 of the Rent Act 1957 (which limits the application of the said Act of 1946) had not been enacted.

(3) This section shall have effect as if it were inserted in the Income Tax Act 1952 immediately after the said section 210.—[Mr. Houghton.]

Brought up, and read the First time.

Motion made, and Question put, That the Clause be read a Second time:—

The House divided: Ayes 166, Noes 209.

Division No. 124.]
AYES
[7.51 p.m.


Ainsley, William
Griffiths, Rt. Hon. James (Llanelly)
Oram, A. E.


Allaun, Frank (Salford, E.)
Grimond, Rt. Hon. J.
Owen, Will


Alldritt, W. H.
Gunter, Ray
Padley, W. E.


Allen, Scholefield (Crewe)
Hale, Leslie (Oldham, W.)
Panned, Charles (Leeds, W.)


Awbery, Stan (Bristol, Central)
Hamilton, William (West Fife)
Paton, John


Beaney, Alan
Hannan, William
Pavitt, Laurence


Bence, Cyril
Harper, Joseph
Pearson, Arthur (Pontypridd)


Benn, Anthony Wedgwood
Hayman, F. H.
Peart, Frederick


Benson, Sir George
Henderson, Rt. Hn. Arthur (Rwly Regis)
Pentland, Norman


Blackburn, F.
Herbison, Miss Margaret
Prentice, R. E.


Blyton, William
Hill, J. (Midlothian)
Price, J. T. (Westhoughton)


Boardman, H.
Hilton, A. V.
Probert, Arthur


Bottomley, Rt. Hon. A. G.
Holman, Percy
Rankin, John


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Holt, Arthur
Redhead, E. C.


Bowen, Roderic (Cardigan)
Houghton, Douglas
Rees, Merlyn (Leeds, S.)


Bowles, Frank
Howell, Denis (Small Heath)
Rhodes, H.


Braddock, Mrs. E. M.
Hoy, James H.
Roberts, Albert (Normanton)


Bradley, Tom
Hughes, Cledwyn (Anglesey)
Roberts, Goronwy (Caernarvon)


Brockway, A. Fenner
Hughes, Emrys (S. Ayrshire)
Robertson, John (Paisley)


Broughton, Dr. A. D. D.
Hughes, Hector (Aberdeen, N.)
Rodgers, W. T. (Stockton)


Brown, Rt. Hon. George (Belper)
Hunter, A. E.
Ross, William


Butler, Herbert (Hackney, C.)
Hynd, H. (Accrington)
Short, Edward


Carmichael, Neil
Hynd, John (Attercliffe)
Silkin, John


Castle, Mrs. Barbara
Irvine, A. J. (Edge Hill)
Slater, Joseph (Sedgefield)


Chapman, Donald
Jay, Rt. Hon. Douglas
Small, William


Collick, Percy
Johnson, Carol (Lewisham, S.)
Smith, Ellis (Stoke, S.)


Corbet, Mrs. Freda
Jones, Elwyn (West Ham, S.)
Snow, Julian


Craddock, George (Bradford, S.)
Jones, T. W. (Merioneth)
Sorensen, R. W.


Cronin, John
Kenyon, Clifford
Steele, Thomas


Crosland, Anthony
Key, Rt. Hon. C. W.
Stones, William


Cullen, Mrs. Alice
King, Dr. Horace
Strauss, Rt. Hn. G. R. (Vauxhall)


Dalyell, Tam
Lawson, George
Stross, Sir Barnett (Stoke-on-Trent, C.)


Darling, George
Lee, Miss Jennie (Cannock)
Swingler, Stephen


Davies, Ifor (Gower)
Lever, L. M. (Ardwick)
Symonds, J. B.


Davies, S. O. (Merthyr)
Lewis, Arthur (West Ham, N.)
Taylor, Bernard (Mansfield)


Deer, George
Loughlin, Charles
Thornton, Ernest


Delargy, Hugh
Lubbock, Eric
Timmons, John


Dempsey, James
Mabon, Dr. J. Dickson
Tomney, Frank


Diamond, John
McBride, N.
Wade, Donald


Dodds, Norman
MacColl, James
Wainwright, Edwin


Doig, Peter
McInnes, James
Warbey, William


Driberg, Tom
McKay, John (Wallsend)
Watkins, Tudor


Edwards, Rt. Hon. Ness (Caerphilly)
McLeavey, Frank
Weitzman, David


Edwards, Robert (Bilston)
MacPherson, Malcolm
Whitlock, William


Evans, Albert
Manuel, Archie
Wilkins, W. A.


Finch, Harold
Mapp, Charles
Willey, Frederick


Foot, Dingle (Ipswich)
Mason, Roy
Williams, W. T. (Warrington)


Foot, Michael (Ebbw Vale)
Mayhew, Christopher
Willis, E. G. (Edinburgh, E.)


Forman, J. C.
Mendelson, J. J.
Winterbotton, R. E.


Fraser, Thomas (Hamilton)
Millan, Bruce
Woodburn, Rt. Hon. A.


Galpern, Sir Myer
Mitchison, G. R.
Woof, Robert


George, LadyMeganLloyd (Crmrthn)
Monslow, Walter
Yates, Victor (Ladywood)


Ginsburg, David
Moody, A. S.



Gordon Walker, Rt. Hon. P. C.
Morris, Charles (Openshaw)
TELLERS FOR THE AYES:


Gourlay, Harry
Morris, John (Aberavon)
Mr. Charles A. Howell and


Greenwood, Anthony
Moyle, Arthur
Mr. Grey.


Griffiths, David (Rother Valley)
O'Malley, B. K.





NOES


Agnew, Sir Peter
Biggs-Davison, John
Carr, Compton (Barons Court)


Allan, Robert (Paddington, S.)
Bingham, R. M.
Carr, Rt. Hon. Robert (Mitcham)


Allason, James
Bishop, Sir Patrick
Chataway, Christopher


Anderson, D. C.
Bourne-Arton, A.
Clark, Henry (Antrim, N.)


Ashton, Sir Hubert
Box, Donald
Clark, William (Nottingham, S.)


Atkins, Humphrey
Boyd-Carpenter, Rt. Hon. John
Cleaver, Leonard


Awdry, Daniel (Chippenham)
Braine, Bernard
Cole, Norman


Barber, Rt. Hon. Anthony
Brooke, Rt. Hon. Henry
Cooper, A. E.


Barter, John
Brown, Alan (Tottenham)
Cooper-Key, Sir Neill


Batsford, Brian
Buck, Antony
Courdeaux, Lt.-Col. J. K.


Beamish, Col. Sir Tufton
Bullard, Denys
Cordle, John


Bell, Ronald
Bullus, Wing Commander Eric
Corfield, F. V.


Bevins, Rt. Hon. Reginald
Burden, F. A.
Costain, A. P.


Bidgood, John C.
Campbell, Gordon
Courtney, Cdr. Anthony




Craddock, Sir Beresford (Spelthorne)
Hutchison, Michael Clark
Pym, Francis


Critchley, Julian
Iremonger, T. L.
Ramsden, Rt. Hon. James


Curran, Charles
Irvine, Bryant Godman (Rye)
Rawlinson, Rt. Hon. Sir Peter


Currie, G. B. H.
James, David
Redmayne, Rt. Hon. Martin


Dance, James
Johnson, Eric (Blackley)
Rees, Hugh (Swansea, W.)


d'Avigdor-Goldsmid, Sir Henry
Johnson Smith, Geoffrey
Ridsdale, Julian


Donaldson, Cmdr. C. E. M.
Jones, Rt. Hon. Aubrey (Hall Green)
Roots, William


Doughty, Charles
Kaberry, Sir Donald
Ropner, Col. Sir Leonard


Douglas-Home, Rt. Hon. Sir Alec
Kerans, Cdr. J. S.
Russell, Sir Ronald


Drayson, G. B.
Kerby, Capt. Henry
Scott-Hopkins, James


du Cann, Edward
Kerr, Sir Hamilton
Sharples, Richard


Duncan, Sir James
Kirk, Peter
Shaw, M.


Eden, Sir John
Lancaster, Col. C. G.
Skeet, T. H. H.


Elliot, Capt. Walter (Carshalton)
Legge-Bourke, Sir Harry
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Emery, Peter
Lewis, Kenneth (Rutland)
Spearman, Sir Alexander


Emmet, Hon. Mrs. Evelyn
Lilley, F. J. P.
Stainton, Keith


Errington, Sir Eric
Litchfield, Capt. John
Steward, Harold (Stockport, S.)


Farey-Jones, F. W.
Lucas-Tooth, Sir John
Stoddart-Scott, Col. Sir Malcolm


Farr, John
McAdden, Sir Stephen
Storey, Sir Samuel


Fell, Anthony
MacArthur, Ian
Studholme, Sir Henry


Fisher, Nigel
McLaren, Martin
Tapsell, Peter


Fletcher-Cooke, Charles
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs)
Taylor, Sir Charles (Eastbourne)


Fraser, Ian (Plymouth, Sutton)
Macleod, Sir John (Ross &amp; Cromarty)
Taylor, Edwin (Bolton, E.)


Freeth, Denzil
McMaster, Stanley R.
Taylor, Frank (M'ch'st'r, Moss Side)


Galbraith, Hon. T. G. D.
Macmillan, Maurice (Halifax)
Teeling, Sir William


Gammans, Lady
Maginnis, John E.
Thatcher, Mrs. Margaret


Gardner, Edward
Maitland, Sir John
Thomas, Sir Leslie (Canterbury)


Gibson-Watt, David
Markham, Major Sir Frank
Thompson, Sir Kenneth (Walton)


Giles, Rear-Admiral Morgan
Marples, Rt. Hon. Ernest
Thompson, Sir Richard (Croydon, S.)


Gilmour, Sir John (East Fife)
Marshall, Sir Douglas
Thornton-Kemsley, Sir Colin


Glyn, Dr. Alan (Clapham)
Marten, Neil
Tiley, Arthur (Bradford, W.)


Goodhew, Victor
Matthews, Gordon (Meriden)
Touche, Rt. Hon. Sir Gordon


Grant-Ferris, R.
Maude, Angus (Stratford-on-Avon)
Turner, Colin


Green, Alan
Maudling, Rt. Hon. Reginald
Turton, Rt. Hon. R. H.


Gresham Cooke, R.
Mawby, Ray
Tweedsmuir, Lady


Griffiths, Eldon (Bury St. Edmunds)
Maxwell-Hyslop, R. J.
van Straubenzee, W. R.


Grosvenor, Lord Robert
Maydon, Lt.-Cmdr. S. L. C.
Walder, David


Hall, John (Wycombe)
Miscampbell, Norman
Walker, Peter


Hamilton, Michael (Wellingborough)
Montgomery, Fergus
Walker-Smith, Rt. Hon. Sir Derek


Harris, Frederic (Croydon, N. W.)
More, Jasper (Ludlow)
Wall, Patrick


Harris, Reader (Heston)
Morrison, Charles (Devizes)
Webster, David


Harrison, Brian (Maldon)
Morrison, John (Salisbury)
Whitelaw, William


Harrison, Col. Sir Harwood (Eye)
Neave, Airey
Williams, Sir Rolf Dudley (Exeter)


Harvie Anderson, Miss
Oakshott, Sir Hendrie
Williams, Paul (Sunderland, S.)


Heald, Rt. Hon. Sir Lionel
Orr, Capt. L. P. S.
Wills, Sir Gerald (Bridgwater)


Henderson, Sir John (Cathcart)
Osborn, John (Hallam)
Wilson, Geoffrey (Truro)


Hiley, Joseph
Page, John (Harrow, West)
Wise, A. R,


Hill, Mrs. Eveline (Wythenshawe)
Pannell, Norman (Kirkdale)
Wolrige-Gordon, Patrick


Hill, J. E. B. (S. Norfolk)
Pearson, Frank (Clitheroe)
Woodhouse, Hon. Christopher


Hirst, Geoffrey
Peel, John
Woodnutt, Mark


Hocking, Philip N.
Percival, Ian
Woollam, John


Hogg, Rt. Hon. Quintin
Pickthorn, Sir Kenneth
Worsley, Marcus


Holland, Philip
Pitt, Dame Edith
Yates, William (The Wrekin)


Hollingworth, John
Powell, Rt. Hon. J. Enoch



Hughes Hallett, Vice-Admiral John
Price, David (Eastleigh)
TELLERS FOR THE NOES:


Hughes-Young, Michael
Prior, J. M. L.
Mr. Chichester-Clark and


Hulbert, Sir Norman
Proudfoot, Wilfred
Mr. R. W. Elliott.

New Clause No. 12.—(INCOME TAX: FEU DUTIES.)

(1) The Income Tax Acts shall apply to feu duties as they apply to yearly interest secured on land in Scotland.

(2) A person entitled to receive feu duties shall not be charged to income tax in respect of them under Case VIII of Schedule D.

(3) No person shall be liable by virtue of this section to pay any more tax than he would have been liable to pay, if this section had not been enacted.—[Mr. Willis.]

Brought up, and read the First time.

8.0 p.m.

Mr. E. G. Willis: I beg to move, That the Clause be read a Second time.
We discussed this in Committee and I have no wish to repeat the history of

the matter or what I said then about the manner in which feu duties were charged against income prior to 1963. In practice up to 1940 and legally from 1940 to 1963, they were chargeable against income for tax purposes. As a result of the abolition of Schedule A, they have ceased to be chargeable. As a result, very many owner-occupiers in Scotland are worse off. The number runs into tens of thousands.
I have had correspondence with the Financial Secretary about this and he has told me that it was all explained during the passage of the Finance Act, 1963. But whilst, during those proceedings, technical changes were explained, I do not think that anyone in the House


at the time realised that, as a result of those changes, tens of thousands of owner-occupiers would be worse off. I received today another letter from my correspondent on this subject, a gentleman whose name is known to the Financial Secretary. My correspondent said:
There was no explanation that certain taxpayers in the United Kingdom would be worse off when Schedule A was abolished. The ordinary taxpayer is not interested in technical changes or procedure. He is interested in changes in the amount of tax suffered.
People do not necessarily follow these technical analyses and I must say that, having read our debates of last year on the subject, I find them difficult to follow.
During the Committee stage of this Bill, I argued that we should return to the position that always existed in Scotland before 1963. There were very good reasons for not departing from it in the first place. I pointed out that our argument for this rested upon the nature of a feu and a feu duty. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) made a very helpful speech on the technicalities. Talking about rent and lease, he said:
But the feu has two peculiarities which have nothing in common with that. One is that it goes on for ever, subject to one thing. It is a security. In other words, if the feu superior is not paid he can irritate the feu and take back the property. I think that irritating a feu is difficult, but I can say nothing about that. As my hon. Friend pointed out, feu duties are simply, on the other hand, a form of investment. I think that as an executor I am the owner of about half-a-dozen small feu duties. They are unmarketable things. They are sold by advertisement in the papers through Writers to the Signet or solicitors. I have never seen the property and never expect to see it. They go on being paid. I have no obligation in respect of the property, nor has a feu superior under Scots law.
My hon. and learned Friend went on to point out that, in Scotland, there is no such thing as a mortgage. He said that we had bonds or dispositions in security. Those of us who served on the Committee stage of the Local Government (Development and Finance) (Scotland) Bill will remember lengthy discussions on the fact that there are no mortgages in Scotland. My hon. and learned Friend suggested that the feu duty—and this is my view also—
… is far nearer a bond or disposition in security than it is to an English rent."—

[OFFICIAL REPORT, 18th June, 1964; Vol. 696, c. 1694–5.]
My hon. and learned Friend put a good case regarding exactly what a feu is. Since then I have tried to study the matter further in Green's "Encylo-paedia of Scots Law". I found it most interesting, but mainly unintelligible—at least to me. However, there seemed to be something to be said for my case. I do not know whether the Financial Secretary has also used the interval to study the 30 or 40 pages in the encyclopaedia devoted to the subject. If he has he may have found better answers than he produced last time.
As a result of the Government's misguided, but, unfortunately, injurious policy, the cost of land in Scotland has risen considerably. One practice that has grown up as a result is that builders who buy the land have to devise means of ensuring that they get their money back. They do so, of course, by building more houses per acre, by adding to the price of the houses and by increasing the feu duty. Once they have built more houses to the acre and put the prices of the houses up, they probably still have to find another £200 or £300 per house, and since they do not feel they can further increase the prices they use the feu duty. The builders lay out their money in this way in order to secure upon it interest payments from the feuars. This is a form of interest payment which the feuar has to pay to the builder.

Mr. Green: Mr. Green indicated dissent.

Mr. Willis: The hon. Gentleman shakes his head, but I should have thought that that was precisely what it was. The builder cannot get his £300 or £400 back in any other way, so he charges it on the feu.
This also points to the anomaly of the difference in treatment of a mortgage interest payment, which is chargeable against income, and a feu duty which is not so chargeable. The sum which the builder adds to the cost of the house can be covered by a mortgage, the interest payments on which are chargeable against income from the house, but the amount which he charges as a feu duty is not treated in that fashion.
I cannot see the difference. If I have laid out £800 and I get that back by


adding £500 to the cost of the house, increasing the feu duty so as to get back the £300, the owner-occupier can charge the interest on the mortgage, which includes the £500, against his income, but not the feu duty. This is a practical example of what is happening in Scotland and shows that feu duties should be treated in the same way as payments of interest and allowed as a charge against income for tax purposes.
I find the difference difficult to justify in the same way that I find it difficult to justify allowing interest on a bank overdraft to be chargeable against income. None of the people in Scotland to whom I have spoken has been able to explain to me why the interest on a bank overdraft should be chargeable against income for tax purposes. There are many other anomalies about what is chargeable and what is not, and it would not be a bad idea if the Government endeavoured to rationalise this business of charges against income. Like Alice, these anomalies have grown up and given rise to practices which are not generally understood.
When the Government abolished Schedule A, did they intend that tens of thousands of people would pay more Income Tax than before Schedule A was abolished? Did they know that that would be the result? If not, they should now reconsider the position and try to do something to remedy this state of affairs. The present situation makes nonsense of their professed desire to assist home ownership. It is not good enough to talk about wishing to encourage home ownership if one then adds to the burdens of the owner-occupier. What makes it even worse is to go to the country and claim to have given generous help to owner-occupiers by having abolished Schedule A, for tens of thousands of people are worse off.
8.15 p.m.
During our last discussion on this point, the Financial Secretary said that the cost of my proposal would be about £1 million. I think that it would be very much less than that, because there are only about 320,000 or 330,000 owner-occupied houses in Scotland and the amount per house is not very large. With the older houses the amount would be very small, because years ago feus were relatively small. They have become much

larger in the last few years, which is another benefit of Tory rule. The hon. Gentleman was probably overstating the cost when he suggested that it would be about £1 million. That is an additional reason for regarding the new Clause favourably.
Previously, we suggested that the hon. Gentleman should consult Scottish legal opinion. I know that he has consulted some, but I do not think that he has read Green's "Encyclopaedia", or Gloag and Henderson.

Mr. William Ross: Or Walter Ross.

Mr. Willis: I hope that as a result of his studies he has come rather more to our point of view and that tonight he will say that as a result of our eloquence on the previous occasion, the strength of our arguments, the result of his studies of Scottish law and practice and his consultations with Scottish legal opinion, he will be able to accept the Clause.

Mr. Ross: My hon. Friend the Member for Edinburgh, East (Mr. Willis) has put the case so well and so persuasively that there is not much to add. The Financial Secretary should appreciate the simplicity of the new Clause. It is comprehensible and its drafting is perfect.

Mr. Willis: I intended to say, during my speech, that I had had a little assistance with the new Clause and that I wanted to express my gratitude.

Mr. Ross: I thought that my hon. Friend was about to say that he had had some assistance from the Lord Advocate, and I was about to read the Clause again to find out what was wrong with it. But it is very simple. It does what it says it proposes to do. It says:
The Income Tax Acts shall apply to feu duties as they apply to the yearly interest secured on land in Scotland.
I do not want to make a long speech on this subject, although I could do so. The yearly interest secured on land in Scotland has a long history. The story goes back to pre-1537, the year in which there was the abrogation of the law against usury in Scotland. But even within that time people had found a way round the law, and I think that this is relevant to the whole situation. Land would be "wadset", which really meant that a person who wanted to borrow


money would give the rent on his land in exchange for a sum of money, and, of course, the rent was related to what the interest would be on that money. In other words, it was a wangle, but it was a reasonable way of doing things. That really was the start of yearly interest secured on land in Scotland.
What is the difference between that and a feu? I think that my hon. Friend has put the matter into its proper perspective. Nobody owns land in Scotland. It is all nationalised. The ultimate owner of all the land in Scotland is the Crown. There are, of course, one or two exceptions, but I am sure that the hon. Gentleman does not want me to go into the burgage tenure, blench farm. Let us stick to the feu-farm tenure.
The ultimate interest in the land lies in the Crown. It would be very simple for the Crown to reassert its rights. The land was held by a vassal on the condition that he would assist the Crown in times of war in the defence of the country. It would not be a bad idea if we transferred the cost of armaments today to the landowners. We would certainly have some squeals perhaps from someone who owns a lot of land on the borders, as well as another 60 farms in Lanarkshire. He may hold much of this land as a result of what his family was able to grab at the time of the Reformation; land which originally belonged to the abbey at Jedburgh, or even Kelso. There are many interesting facets to this question, but I think that we had better get back to the point at issue.
The fact is that this feudal duty has been translated in respect of the lower echelons on this holding on the vertical line from the Crown to occupying owner into money payments—feu duty. My hon. Friend asked why it was not treated in the same way as interest on a bank overdraft. When we think of the cost of this, if we think in terms of feu duties on ancient tenements, we find that it is practically nominal. The feu duty on houses built before the war was 5s. or 30s. a year—little or nothing. This sum was paid in perpetuity.
The position today is very different. Land in Scotland is changing hands at tremendous prices as a result of the Town and Country Planning Act, 1957, even though at that time we were told by the

Minister who is now in another place, Niall MacPherson as we knew him, that the Measure was purely theoretic from the Scottish point of view. I could show the Minister land in Ayr, on the Roselle Estate, which is now being used for building purposes. At one time three houses per acre were built on that estate. Now, as a result of the land prices when a piece of land changes hands and is bought by a speculative builder, the density of the houses built is not merely doubled but increased to an even greater extent.
The cost of the house bears a direct relationship to the cost of the land. A builder has to get a return on his purchase of the land. He has feued a piece of land from the next upper land superior. He pays his feu duty to that person. He therefore has to sub-feu it to other people, and he includes the price that he paid for the land in these new feus.
My house was built about 10 years ago, and my feu duty was £15 a year. I thought that it was high, but it is not high when compared with what people pay today for smaller properties. The increase in the feu duty bears a direct relationship to the increase in the cost of land. Part of the cost of the land goes into the capital cost of the house, and the rest of it goes into the feu duty.
The person who buys a house can offset the portion of the land cost included in the capital cost against income, but the Government say that that cannot be done in respect of the feu duty element of the cost of the land. Feu duty is a direct interest payment in relation to the cost of the land, and, indeed, to the cost of the house. The hon. Gentleman apparently does not believe me. One of the first Acts of Parliament passed by the Tory Party was the Long Leases (Scotland) Act, 1952. That Measure was based on the report of a committee which was set up to deal with a problem which we thought was arising only in Lanarkshire, particularly in Stonehouse, and some other small villages where 100 years ago, in order to get round the law of entail which barred feuing of the land, landlords granted long leases.
We did not think that there were many, but we found that in Lanarkshire there were more than 4,000, in Wigtown there were 400, in Kirkcudbright there were 780, and that the total number ran into thousands. We found that in the


Ardrossen-Saltcoats area there was a long lease for 9,999 years. There is an element of pertpetuity about that one. It was done to get round the law of the land, which precluded the alienation of the property from the family. Many other properties which had been leased for 99 years were falling in, and if nothing was done not only the land but the houses as well would revert to the landowners.
8.30 p.m.
So the Labour Government set up a Committee, of which I was privileged to be a member. Lord Guthrie was its distinguished chairman, and there was a gentleman on it who later became a Tory Lord Advocate. He now graces with distinction and honour the Scottish Bench—Lord Clyde. The Committee produced a Report which was accepted by the Government. To put the matter right, and to translate a lease into a feu, we imagined that no matter how long the ish had to go—the ish being the tail end of a Scottish lease—we gave it 30 years, took the capital value of the property in the land, and related to it the sum of money which, at 5 per cent., would reach that value over 30 years.
If the value is £1,000 the sum necessary to attain £1,000 at compound interest of 5 per cent. over 30 years, believe it or not, is £231. The Act of Parliament sought to translate that £231 into two items, one of which was to be a feu duty and the other a capital payment. Nothing was laid down as to how it should be divided. It could all be feu duty or all capital payment. The people of Scotland had the right, for five years, to elect to do this, and many Welsh people wish that they had had a similar provision which would have enabled them to get rid of leasehold in Wales. We made it practicable in Scotland. At times we may be a little long-winded, but we get things done in the end.
In the Report we showed how the sum should be divided into two portions, the grassum of £102 10s. and the sum of £115 10s. to be translated into a feu duty. They became the Government's own proposals, presented to and accepted by the House. That proves the case. It shows that the feu duty is equivalent to a yearly interest rate. After these few preliminary remarks on the Amendment, the Minister will see the importance and relevance of the matter.
This is happening more and more in respect of feu duties at present. The Government are going all out for home ownership in Scotland. Last week, the Secretary of State told us that the Government hope to build 7,000 houses this year. That is an improvement of about 1,000 on last year, but it is less than the year before. The Government must consider to what extent this feu duty element—which is an evidence of the high cost of land—will be a bar to home ownership in Scotland. The Clause provides one way in which they could offset it. They could make it chargeable against income for tax purposes, just as the rest of it may be offset on the mortgage in respect of the cost of a house which includes part of the cost of the land. It is just another element in the same thing, that is being treated in a different way.
I hope that the Government will accept the Clause. It will be a tremendous disappointment to the people of Scotland when they discover, as I have discovered, that the abolition of Schedule A will mean absolutely nothing. I have discovered that I must pay just as much Income Tat in respect of my property as I paid before.

Mr. Bruce Millan: It may be more.

Mr. Ross: It may be more, I am told. My hon. Friend can tell me, but he must not tell my wife. She is sufficiently worried about the expenses involved in property owning at present.
By accepting the Clause the Government can do something towards reaching the target that they are always telling us they have before them. There is still not a ready acceptance of home ownership. We used to be told that it was a question of the rating system, and that if we changed it all would be well. Well, we changed it in 1956, and it still lacks. Now the Government are trying to create a new reason; they say that it is something to do with the rents paid in council houses. In fact, it is probably related to the instability of employment and the low wages paid in Scotland.
Here is something that the Government can do to help, and I hope that the Minister will take this chance and accept the new Clause. Its language is impeccable, and it has been moved in an


impeccable manner by my hon. Friend the Member for Edinburgh, East.

Mr. Green: I am glad to have been able to have a talk with the hon. Member for Edinburgh, East (Mr. Willis). I hope that, in technical terms at least, that talk was helpful to him. It is certainly not on the basis of the language of the new Clause that I want to reply. When one drafts these Clauses one feels as if one is going through a minefield. One is never quite sure whether one has spotted all the mines.
Fortunately for me, anyway, no point of Scottish law arises in connection with the feu. Section 15(1,b) of the Finance Act, 1963, specifically and by name brings within the charge to tax under Case VIII of Schedule D
rent charges, ground annuals and feu duties, and any other annual payments reserved in respect of, or charged on or issuing out of, such land.
It is clear beyond any doubt that as the law stands feu duties will in future be payable in full, without deduction of tax.
I must also point out that a feu duty is a perpetual rent.

Mr. Ross: Whatever else it is, it is not rent.

Mr. Green: I am very sorry, but if the hon. Member for Kilmarnock (Mr. Ross) wishes to challenge this question of law he must take his challenge to the right place. It is quite indistinguishable from the ground rent under a long lease, and it is for this reason that it was named in Section 15 of the 1963 Act.
Hon. Members opposite may well be concerned with other matters under Scottish law, but what we are concerned with in the Clause is the question whether it is right to exempt from the provisions of Section 15 of the 1963 Act feu duty, in particular when it has been classed with ground rent, from which, for all practical purposes, it is indistinguishable. It has in fact been classed as a ground rent—[HON. MEMBERS: "No."] That is the situation. It is all very well for hon. Members opposite to shake their heads and say "No", but this, I am afraid, is what is exactly and expressly laid down.

Mr. Millan: Surely the argument is about whether the Finance Act, 1963, is wrong. That is what we are challenging. There is no point in the hon. Gentleman starting off as if the Finance Act, 1963, were something which we all accept. The basic assumption of the argument is that we do not.

Mr. Green: That is very nice, but it seems to me a great pity that during the passage of the Finance Act no Scottish interest or, apparently, no Scots lawyer, spotted this basic Scottish misconception. That is apparently what happened last year—

Mr. Ross: Mr. Ross rose—

Mr. Green: May I finish the point?

Mr. Ross: It is Scottish law.

Mr. Green: That has nothing to do with the argument. No point of law arises for me on this—

Mr. John Rankin: On a point of order, Mr. Deputy-Speaker. I wonder whether the Financial Secretary can tell me whether he said in his reply that this matter arose from a Scottish misconception last year?

Mr. Deputy-Speaker (Sir R. Grimston): Order. That is not a point of order and the hon. Gentleman must know it.

Mr. Green: What we are discussing here is clear from the wording of the Clause. It is the specific exemption of feu duty. Only to that can I address myself, and that it what I am trying to do. I should be wildly out of order if I failed to do so.

Mr. Ross: We are getting into rather a legal tangle, because the whole thing impinges on a definition of what it is we are discussing. We cannot discriminate against other things in the 1963 Act. Should I be in order in asking that the House stand adjourned until such time as we have a Scottish Law Officer present?

Mr. Deputy-Speaker: No.

Mr. Green: I am grateful, Mr. Deputy-Speaker. The point which I think we had reached—[Interruption.]—it seems necessary occasionally to bring hon. Gentlemen back to what we


started to discuss—was that a special and specific exemption should be made for feu duty. I am seeking to speak to that, if I am allowed to do so, and if we can avoid—

Mr. Willis: Mr. Willis rose—

Mr. Deputy-Speaker: Order. This is not the Committee stage, but the hon. Member for Edinburgh, East (Mr. Willis) has the right to speak more than once and it is not necessary for him to intervene.

Mr. Willis: The point I wanted to make is this. We are trying to suggest that the inclusion of this in the Finance Act last year was wrong.

Mr. Green: I appreciate that, but I have to contest it. It does not seem to me to be wrong to say that it is, in fact, a perpetual rent, as has been accepted so far in this House and elsewhere, and was accepted by Scottish Members of Parliament last year. They may not have noticed it, or something—I do not know. I do not want to make a great argument of it. All I am saying is that they accepted it, and it is written into the Finance Act, 1963. Now a claim is being made that a feu is not a perpetual rent, or is not rent. The feu is connected with the right of the owner, the occupier, to go on occupying the land. If he does not pay the feu, he can be dispossessed. So there is a clear connection between the feu duty which he has to pay and his right of occupancy.
I say, as I said during the Committee stage discussions, that although there are technical differences between a feu and a ground rent—they go back a long way, I understand, and who am I to disentangle them—both of them differ from interest charges.
8.45 p.m.
I come to one or two specific points made by the hon. Member for Edinburgh, East. He said, quite rightly, that some owner-occupiers, because of the abolition of Schedule A, would be paying more than they paid before. I accept what he said in Committee and there is hardly necessity for me to repeat it. I also gave him reason why that was so. Perhaps as he has reminded the House of that fact, I can remind the

House of why it should happen. Schedule A was a tax on the notional value. The notional value naturally remained unchanged through the war. The Labour Government in 1945 did not revitalise, or remake, or put back into operation, machinery for revaluing Schedule A.
I do not quarrel about that, but it is a fact. As a result Schedule A values on which the notional tax was charged were completely out of date very quickly after the end of the war, and have become progressively more out of date ever since. Payers of Schedule A tax—this covers those who pay feu duty in Scotland and ground rent in England—were benefiting very substantially from the fact that they were being notionally taxed on an increasingly falsely low value. The alternative to abolishing Schedule A was to revalue for Schedule A purposes all properties, including those in Scotland. I do not think the constituents of the hon. Member would have wished that to be done.
He knows why the problem did not arise in Scotland—because it was so small at that time—but to revalue the properties and modernise the notional value would have meant a very much greater Schedule A payment. Although I cannot give the exact numbers, tens of thousands are suffering a small additional charge, but many more than tens of thousands are getting a benefit from the abolition of Schedule A. I must put that into the scale as well. It is unquestionably true.
The Revenue gave up a substantial sum in tax collected when Schedule A was abolished. Abolishing Schedule A has not increased revenue. We cannot push that argument too far, and I do not think that the hon. Member, to do him justicee, wishes to do so. He has properly drawn attention to certain grievances because of the abolition of Schedule A. It is difficult to convince taxpayers that the alternative would have hurt them very gravely. The third choice would not be exemption of feu duty alone, not the ability to charge feu duty alone against general income, but ground rent as well, because the two for tax purposes are indistinguishable.
I asked the hon. Member for Cardiff, South-East (Mr. Callaghan) if he would care to put down a new Clause to debate the whole idea of exempting ground


rent and not just one form of ground rent, feu duty. I notice that that new Clause has not been put down, and I think very wisely, because if we exempt one form of rent, we have to exempt all forms of rent, and I do not believe that either party, when in Government, would wish to do that, partly on grounds of cost and partly for other reasons.
It could not stop at rents. If rents, why not food, why not clothes, why not all the other normal necessary expenses to which human beings are subjected? Why not all these things? The more one thinks about it the more it seems wrong to create yet another anomaly in this body of law by specifically exempting feu duties, which are indistinguishable for the purpose of Income Tax from ground rent
On those grounds of principle and on grounds of equity, I invite the House to reject the Clause.

Mr. Millan: I do not think that all hon. Members found that a very convincing reply to the arguments put up by my hon. Friends, and I should like to take up a number of points which the Financial Secretary made.
The first is whether we wish to make only feu duties a general charge on income and not to deal with ground rents and all the other possible charges on land. The Clause is concerned only with feu duties, and there are other arguments which can be put about the other items, but it is not a very good reason for turning down this new Clause on feu duties to say that it might open the door to concessions for other forms of payment. One of the arguments which we have made is that the feu duty is not simply another kind of ground rent but that there are certain distinctive characteristics of it which mean that it should be treated in a distinctive way.
The other preliminary point which I will mention concerns the Financial Secretary's statement that no one noticed this last year. It has been pointed out that we did not have a Scottish Law Officer in the House last year—and, indeed, we do not have a Scottish Law Officer in the House now.

Mr. Green: I do not want the hon. Member to argue on a false point. I

stated that no point of Scottish law arises here.

Mr. Millan: That is begging the question. The hon. Gentleman advanced absolutely no evidence to substantiate that point of view. All he did was refer us to the 1963 Act. But our whole argument this evening is that the 1963 Act was wrong. It is no use appealing to us to accept that Act as settling the matter because it is precisely that Act which we question.
Furthermore, it is notorious that the 1963 Schedule A legislation was extremely difficult and obscure. I think that I am right in saying that all the professional organisations—the accountants of England and Wales and the incorporated accountants, for example—have protested to the Government about what they call the shoddy legislation which we had in the 1963 Act concerning the abolition of Schedule A. I see a qualified accountant on the opposite benches—the hon. Member for Nottingham, South (Mr. W. Clark); and he will confirm that representations were made to the Government last year that the 1963 legislation was extremely difficult and obscure. I do not think that it is a good argument to complain that hon. Members who are not qualified lawyers did not appreciate in 1963 all the implications of that legislation from the point of view of Scottish feu duties. We had a number of other things to discuss last year apart from this point.
I want to ask the Financial Secretary a question which he did not answer in Committee and which he has not answered this evening. He has admitted in correspondence to my hon. Friend, and he also admitted in Committee in the House, that in 1940 there was a specific provision in the Finance Act to make feu duty a general charge on income. The original line of the argument was that that happened in 1940, that there was a change in the law for technical reasons, and accidentally feu duty became a general charge on income. The Government have also admitted that, even prior to 1940, feu duty was admitted in practice, though not in law according to the Income Tax Acts, as a general charge in income.
It is a rather extraordinary situation that prior to 1940 feu duty was admitted


as a general charge on income. By a technical defect, according to the Government, in the Finance Act, 1940, feu duty became legally a general charge on income. Yet it took the Government 23 years to 1963 to put that so-called anomaly right. The existence of the practice of treating feu duty as a general charge on income, legally since 1940 and a good deal before that in practice, raises a presumption that the Government have all along intended that feu duty should be a general charge on income, because even Conservative Governments do not usually take 23 years and more to put right an anomaly in the Income Tax Acts.

Mr. Ross: They usually take longer.

Mr. Millan: There is a case to answer on this point. The Financial Secretary has not answered it, either in Committee or in his speech this evening.

Mr. William Clark: I am following the hon. Gentleman's argument with interest. He keeps saying that it took the Government 23 years. What was his party doing between 1945 and 1951?

Mr. Millan: Even Homer nodded, and Labour Chancellors must have nodded between 1945 and 1951. Alternatively, Labour Chancellors very sensibly adopted the attitude that there was not, in fact, an anomaly, that it was perfectly right that feu duty should be treated as a general charge on income, which is our point this evening.
I come to the main point whether feu duty should be treated as analogous to interest. Apart from a rather vague appeal to authority dating only from the Finance Act, 1963, the Financial Secretary did not answer this point. As my hon. Friend the Member for Kilmarnock (Mr. Ross) said, there are certain peculiarities about feu duties. My hon. Friend's description of what happened on the 1952 Act seemed to me to add a great deal of weight to the admission that a feu duty can be treated as analogous to an interest payment. The Financial Secretary, in reply, said that that was not so, because feu duty is a form of rent and, if an owner-occupier does not pay feu duty, he can be dispossessed.
Exactly the same is true of non-payment of bond interest in Scotland. It has been pointed out already that there is no such thing as a mortgage in Scotland. There is a loan by bond in disposition of security. A disposition is an ex facie absolute disposition. In other words, the property is actually transferred to the lender. Any nonpayment of bond interest in Scotland gives an absolute right to dispossession without any other kind of legal proceedings. Therefore, in the matter of dispossession a feu payment is not different from the payment of bond interest. If the hon. Gentleman's argument were taken to its logical conclusion, we should not allow bond interest as a general charge on income in Scotland. Considering all these charges, it is obvious that there is no principle that one can say applies with absolute validity throughout our Income Tax legislation. The whole business of charges is a muddle.
9.0 p.m.
As has been pointed out, the interest on a bank overdraft is allowed as a charge on income, while hire-purchase interest is not. Mortgage interest is allowed as a charge on income, although the hypothetical taxation of owner-occupied property through Schedule A has now disappeared. There is no principle involved and, both in practice and legally, since 1940 feu duties have been allowed as a general charge on income in Scotland. That being so, and there being no argument in principle or practice which validly contradicts the Tightness of what has happened, at least since 1940, my hon. Friends and I see no reason why the concession should not continue to be applied, despite the abolition of Schedule A. There appears to be no danger of any substantial loss of revenue if this concession is continued.
The Financial Secretary admitted that the sum involved would not be more than about £1 million. So far as I can see, there is not even any danger, by various tax avoidance measures, of evasion in respect of feu duties, bearing in mind the fact that mortgage interest is already allowed as a charge on income. There is no reason why the Government could not adequately cover,


by some kind of suitable provision, any objections they might have. In theory and practice it is obvious that there is no reason why the Financial Secretary should object to this concession being continued, and unless he is willing to

change his mind I urge my hon. Friends to take the matter to a Division.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 156, Noes 204.

Division No. 125.]
AYES
[9.2 p.m.


Ainsley, William
Grey, Charles
O'Malley, B. K.


Alldritt, W. H.
Griffiths, David (Rother Valley)
Oram, A. E.


Allaun, Frank (Salford, E.)
Grimston, Sir Robert
Padley, W. E.


Allen, Scholefield (Crewe)
Gunter, Ray
Paton, John


Beaney, Alan
Hale, Leslie (Oldham, W.)
Pavitt, Laurence


Bence, Cyril
Hamilton, William (West Fife)
Pearson, Arthur (Pontypridd)


Benn, Anthony Wedgwood
Hannan, William
Peart, Frederick


Benson, Sir George
Harper, Joseph
Pentland, Norman


Blackburn, F.
Hayman, F. H.
Prentice, R. E.


Blyton, William
Henderson, Rt. Hn. Arthur (Rwly Regis)
Price, J. T. (Westhoughton)


Boardman, H.
Herbison, Miss Margaret
Probert, Arthur


Boston, T. G.
Hill, J. (Midlothian)
Rankin, John


Bottomley, Rt. Hon. A. G.
Hilton, A. V.
Redhead, E. C.


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Holman, Percy
Rees, Merlyn (Leeds, S.)


Bowen, Roderic (Cardigan)
Holt, Arthur
Rhodes, H.


Braddock, Mrs. E. M.
Houghton, Douglas
Roberts, Albert (Normanton)


Bradley, Tom
Howell, Denis (Small Heath)
Roberts, Goronwy (Caernarvon)


Brockway, A. Fenner
Hoy, James H.
Robertson, John (Paisley)


Broughton, Dr. A. D. D.
Hughes, Cledwyn (Anglesey)
Rodgers, W. T. (Stockton)


Butler, Herbert (Hackney, C.)
Hughes, Hector (Aberdeen, N.)
Ross, William


Carmichael, Neil
Hunter, A. E.
Short, Edward


Castle, Mrs. Barbara
Hynd, H. (Accrington)
Silkin, John


Collick, Percy
Hynd, John (Attercliffe)
Slater, Joseph (Sedgefield)


Craddock, George (Bradford, S.)
Irvine, A. J. (Edge Hill)
Small, William


Cronin, John
Johnson, Carol (Lewisham, S.)
Smith, Ellis (Stoke, S.)


Crosland, Anthony
Jones, Elwyn (West Ham, S.)
Sorensen, R. W.


Cullen, Mrs. Alice
Jones, T. W. (Merioneth)
Steele, Thomas


Dalyell, Tam
Kenyon, Clifford
Stones, William


Davies, Ifor (Gower)
King, Dr. Horace
Stross, Sir Barnett (Stoke-on-Trent, C.)


Davies, S. O. (Merthyr)
Lee, Frederick (Newton)
Swingler, Stephen


Deer, George
Lever, L. M. (Ardwick)
Symonds, J. B.


Delargy, Hugh
Lewis, Arthur (West Ham, N.)
Taylor, Bernard (Mansfield)


Dempsey, James
Loughlin, Charles
Thornton, Ernest


Diamond, John
Lubbock, Eric
Timmons, John


Dodds, Norman
Mabon, Dr. J. Dickson
Tomney, Frank


Doig, Peter
McBride, N.
Wade, Donald


Driberg, Tom
MacColl, James
Wainwright, Edwin


Duffy, A. E. P. (Colne Valley)
McInnes, James
Warbey, William


Edwards, Rt. Hon. Ness (Caerphilly)
McKay, John (Wallsend)
Watkins, Tudor


Edwards, Robert (Bilston)
Mallalieu, E. L. (Brigg)
Weitzman, David


Finch, Harold
Manuel, Archie
White, Mrs. Eirene


Fletcher, Eric
Mapp, Charles
Whitlock, William


Foley, Maurice
Mason, Roy
Wilkins, W. A.


Foot, Dingle (Ipswich)
Mayhew, Christopher
Willey, Frederick


Foot, Michael (Ebbw Vale)
Mendelson, J. J.
Williams, W. T. (Warrington)


Forman, J. C.
Millan, Bruce
Willis, E. G. (Edinburgh, E.)


Fraser, Thomas (Hamilton)
Milne, Edward
Winterbottom, R. E.


Galpern, Sir Myer
Mitchison, G. R.
Woodburn, Rt. Hon. A.


George, Lady Megan Lloyd (Crmrthn)
Monslow, Walter
Woof, Robert


Ginsburg, David
Morris, Charles (Openshaw)
Yates, Victor (Ladywood)


Gordon Walker, Rt. Hon. P. C.
Morris, John (Aberavon)



Gourlay, Harry
Noel-Baker, Francis (Swindon)
TELLERS FOR THE AYES:


Greenwood, Anthony
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Mr. Lawson and Mr. C. Howell.




NOES


Agnew, Sir Peter
Bourne-Arton, A.
Cleaver, Leonard


Allason, James
Box, Donald
Cols, Norman


Anderson, D. C.
Boyd-Carpenter, Rt. Hon. John
Cooper, A. E.


Arbuthnot, Sir John
Braine, Bernard
Cooper-Key, Sir Neill


Atkins, Humphrey
Brown, Alan (Tottenham)
Cordeaux, Lt.-Col. J. K.


Awdry, Daniel (Chippenham)
Bryan, Paul
Corfield, F. V.


Barber, Rt. Hon. Anthony
Buck, Antony
Costain, A. P.


Barter, John
Bullard, Denys
Courtney, Cdr. Anthony


Batsford, Brian
Bullus, Wing Commander Eric
Craddock, Sir Beresford (Spelthorne)


Beamish, Col. Sir Tufon
Campbell, Gordon
Critchley, Julian


Bennett, F. M. (Torquay)
Carr, Compton (Barons Court)
Curran, Charles


Bidgood, John C.
Carr, Rt. Hon. Robert (Mitcham)
Currle, G. B. H.


Biggs-Davison, John
Chataway, Christopher
Dance, James


Bingham, R. M.
Chichester-Clark, R.
d'Avigdor-Goldsmid, Sir Henry


Bishop, Sir Patrick
Clark, William (Nottingham, S.)
Deedes, Rt. Hon. W. F.




Donaldson, Cmdr. C. E. M.
Hutchison, Michael Clark
Proudfoot, Wilfred


Doughty, Charles
Irvine, Bryant Godman (Rye)
Pym, Francis


Douglas-Home, Rt. Hon. Sir Alec
James, David
Ramsden, Rt. Hon. James


Drayson, G. B.
Jennings, J. C.
Rawlinson, Rt. Hon, Sir Peter


du Cann, Edward
Johnson, Eric (Blackley)
Redmayne, Rt. Hon. Martin


Duncan, Sir James
Johnson Smith, Geoffrey
Ridley, Hon. Nicholas


Eden, Sir John
Jones, Rt. Hon. Aubrey (Hall Green)
Ridsdale, Julian


Elliot, Capt. Walter (Carshalton)
Kaberry, Sir Donald
Roots, William


Elliott, R. W. (Newc'tle-upon-Tyne, N.)
Kerans, Cdr. J. S.
Ropner, Col. Sir Leonard


Emery, Peter
Kerby, Capt. Henry
Russell, Sir Ronald


Emmet, Hon. Mrs. Evelyn
Kerr, Sir Hamilton
Scott-Hopkins, James


Errington, Sir Eric
Kershaw, Anthony
Sharples, Richard


Farey-Jones, F. W.
Kirk, Peter
Shaw, M.


Farr, John
Lancaster, Col. C. G.
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Fell, Anthony
Legge-Bourke, Sir Harry
Spearman, Sir Alexander


Finlay, Graeme
Lewis, Kenneth (Rutland)
Stainton, Keith


Fisher, Nigel
Lilley, F. J. P.
Steward, Harold (Stockport, S.)


Fletcher-Cooke, Charles
Lucas, Sir Jocelyn
Stoddart-Scott, Col. Sir Malcolm


Fraser, Ian (Plymouth, Sutton)
Lucas-Tooth, Sir Hugh
Storey, Sir Samuel


Freeth, Denzil
McAdden, Sir Stephen
Studholme, Sir Henry


Galbraith, Hon. T. G. D.
MacArthur, Ian
Taylor, Edwin (Bolton, E.)


Gammans, Lady
McLaren, Martin
Taylor, Frank (M'ch'st'r, Moss Side)


Gardner, Edward
Maclean, Sir Fitzroy (Bute&amp;N. Ayrs.)
Teeling, Sir William


Gibson-Watt, David
McMaster, Stanley R.
Thomas, Sir Leslie (Canterbury)


Giles, Rear-Admiral Morgan
Macmillan, Maurice (Halifax)
Thompson, Sir Kenneth (Walton)


Gilmour, Ian (Norfolk, Central)
Maginnis, John E.
Thompson, Sir Richard (Croydon, S.)


Glyn, Dr. Alan (Clapham)
Maitland, Sir John
Thornton-Kemsley, Sir Colin


Goodhart, Philip
Markham, Major Sir Frank
Tiley, Arthur (Bradford, W.)


Goodhew, Victor
Marshall, Sir Douglas
Touche, Rt. Hon. Sir Gordon


Grant-Ferris, R.
Marten, Neil
Turner, Colin


Green, Alan
Matthews, Gordon (Meriden)
Turton, Rt. Hon. R. H.


Gresham Cooke, R.
Maude, Angus (Stratford-on-Avon)
Tweedsmuir, Lady


Griffiths, Eldon (Bury St. Edmunds)
Maudling, Rt. Hon. Reginald
van Straubenzee, W. R.


Grosvenor, Lord Robert
Mawby, Ray
Vaughan-Morgan, Rt. Hon. Sir John


Gurden, Harold
Maxwell-Hyslop, R. J.
Vaughan-Morgan, Rt. Hon. Sir John


Hall, John (Wycombe)
Maydon, Lt.-Cmdr. S. L. C.
Walder, David


Hamilton, Michael (Wellingborough)
Miscampbell, Norman
Walker, Peter


Harris, Frederic (Croydon, N. W.)
Montgomery, Fergus
Walker-Smith, Rt. Hon. Sir Derek


Harris, Reader (Heston)
More, Jasper (Ludlow)
Ward, Dame Irene


Harrison, Brian (Maldon)
Morrison, Charles (Devizes)
Webster, David


Harvie Anderson, Miss
Morrison, John (Salisbury)
Wells, John (Maidstone)


Hastings, Stephen
Neave, Airey
Whitelaw, William


Heald, Rt. Hon. Sir Lionel
Oakshott, Sir Hendrie
Williams, Sir Rolf Dudley (Exeter)


Henderson, Sir John (Cathcart)
Orr, Capt. L. P. S.
Wills, Sir Gerrald (Bridgewater)


Hendry, Forbes
Osborn, John (Hallam)
Wilson, Geoffrey (Truro)


Hiley, Joseph
Page, John (Harrow, West)
Wise, A. R.


Hill, Mrs. Eveline (Wythenshawe)
Pannell, Norman (Kirkdale)
Wolrige-Gordon, Patrick


Hill, J. E. B. (S. Norfolk)
Pearson, Frank (Clitheroe)
Woodhouse, Hon. Christopher


Hirst, Geoffrey
Percival, Ian
Woodnutt, Mark


Holland, Philip
Pickthorn, Sir Kenneth
Woollam, John


Hollingworth, John
Pitt, Dame Edith
Worsley, Marcus


Hughes Hallen, Vice-Admiral John
Powell, Rt. Hon. J. Enoch
Yates, William (The Wrekin)


Hughes-Young, Michael
Price, David (Eastleigh)



Hulbert, Sir Norman
Prior, J. M. L.
TELLERS FOR THE NOES:




Mr. Peel and Mr. H. Rees.

New Clause No. 13.—(EXEMPTION FROM TAX FOR ANNUITIES PAID BY WAY OF COMPENSATION FOR NATIONAL SOCIALIST PERSECUTION AND LOSS OF OFFICE THEREBY.)

Notwithstanding subsection (1) of section 22 of the Finance Act 1961, annuities payable under the Federal German Compensation Law for Public Service (B.W.G. öD) shall not be regarded as income for any income tax purposes, provided that any such annuity has been awarded and is paid on condition that the recipient thereof has renounced such further or other claim or claims as he might otherwise have possessed for tax-free compensation under BEG (Federal Compensation Law) for racial persecution, and such exemption shall operate retrospectively from the date of the granting of such annuities.—[Mr. Gurden.]

Brought up, and read the First time.

Mr. Harold Garden: I beg to move, That the Clause be read a Second time.
I should perhaps apologise for repetition. This new Clause is exactly the same as the one which I proposed during the Committee stage. I should also apologise for adducing a considerable amount of new argument in addition to that which appeared in column 1677 onwards of the OFFICIAL REPORT for 18th June, but for the benefit of those who were not present on that occasion perhaps I should repeat some of the things which I said then.
The argument was that a taxpayer was paying tax on compensation which was paid to a Czechoslovakian by the German Government for Nazi persecution. This constituent of mine suffered the loss of all his goods and chattels in Czechoslovakia and lost the whole of his family, numbering 60 people, if one


takes in second cousins and the like. The only survivors were Mr. Kollmann, my constituent, and his aunt.
The Germans ultimately agreed compensation, but would not pay it to him. In the final analysis they said, "We are prepared to give you the money, but it will be paid by way of annuity. It suits us better". There was a court sitting to decide these matters, but my constituent was not invited to it to put his case. This was simply imposed on him. He could have his compensation by annuity or not at all. He therefore had to sign saying that he would accept the annuity as compensation for the loss which had been inflicted on his family and himself by Nazi persecution.

Mr. Arthur Lewis: And there were others.

Mr. Gurden: Mr. Kollmann—and I believe that there are others in this country and in other countries in a similar position—had compensation given to him by way of annuity instead of a straight payment. There is no difference in the result. The money would have been paid just the same.
9.15 p.m.
Our Government, in consultation with the German and I believe other Governments, afterwards agreed that there should be tax relief, and indeed no tax charge, on compensation paid for Nazi persecution. This is quite fair because this was compensation for the loss of capital goods. These were physical things, not an earned income. There is nothing of this in dispute, but just because this particular compensation was paid by way of annuity the Income Tax remains to be paid on it, unless something is done tonight to prevent it.
This is a gross injustice. Just because the German Government have not done the right thing is no reason why the British Government should extract money from these people who have suffered so much. Surely they have suffered enough already. Earlier today we discussed what should be or should not be taxed, but I should have thought that there was no political argument here and that all people should now be agreed that compensation paid by the German Government to anybody should not be taxed. I am sure that the British taxpayer would wish to be relieved of this responsibility.
I do not want to repeat the arguments which were put forward in the earlier discussion of this matter. On that occasion my right hon. Friend the Chief Secretary to the Treasury said that it had been agreed between the British and German Governments that if the compensation was admitted there would be no tax charges, but just because this compensation was paid as an annuity by quarterly cheque it is said that it must be taxed if the principle agreed upon is to be maintained. I should have thought that my Amendment was an admissible Amendment, still upholding the principle which was agreed upon between the Governments at that time. In spite of what my right hon. Friend has said, I contend that this slight Amendment, to apply solely to those who suffered Nazi persecution, is well within the limits laid down.
I still maintain that we cannot rely on the German Government to adjust this matter. Efforts have been made to persuade them to transform this payment from an annuity into straight compensation. They will not do this, or at least they have indicated that they are not interested. They have nothing to gain or to lose either way, and I maintain that it is for our Government to make this slight amendment to the law. No other annuity would be free of taxation as a result of this Amendment.
I agree that a genuine annuity might be taxable, but this income was not generated in England. The money comes from Germany. It is nothing to which the taxpayers here are entitled. There is no benefit that they wish to have from it. The amount involved is very small. At a guess, I suppose that a few hundred £s a year would settle the bill. The taxpayers would not be robbed by the slight adjustment which I propose.
The hon. Member for Sowerby (Mr. Houghton) and I have discussed the case and neither of us sees any reason why the Clause should not be accepted. This is not a political matter. In view of everything which has taken place with German compensation, at least we should complete the matter in this way. If we pass the Clause, everybody who receives compensation for what the Germans did will receive his just reward without being taxed upon it.

Mr. Houghton: I am sure that grievous wrong is being done in this case. Had I been able to stay after a very late hour during the Committee stage, I would have given to the hon. Member for Birmingham, Selly Oak (Mr. Gurden) the support that I shall give him now. I am glad that the new Clause has been called on Report, because it was inadequately considered when it came before the Committee. I have studied the case with great care and, as the hon. Member for Selly Oak knows, I have had direct voluminous correspondence with his constituent, with the hon. Member's knowledge and consent.
It will be worth while for the House to spend a few minutes to consider this man's case, because it is a most moving one. This young man was 23 years of age, working in a public department in Prague, when the Nazis overran Czechoslovakia. He is not a German; he is a Czech. By the time that Czechoslovakia was overrun, he had served as an assistant clerk in the first health insurance institution for commercial and private employees for exactly two years and five months only. The significance of that will be clear to the House presently.
This man's family was destroyed by the Nazis. His mother, his brother and his sister were all murdered in concentration camps. Their property was taken away. Other members of the family were murdered, too. The man has come to this country and has married an English girl and he lives in the constituency of the hon. Member for Selly Oak. He is an honourable and, I am sure, valued member of the community. This is now his land of adoption. For these matters to be kept alive in his mind after this time must create unbelievable anguish when he reflects upon what has happened to his family. For 16 years he has been battling with the German authorities to get some compensation for the grievous, irreparable damage done to his family and himself during that time.
There appear to be two schemes of compensation under which the Federal Government can make grants or award annuities for losses and damage which they admit should be compensated in this form. They are both referred to in

the new Clause, and if there are any defects in the Clause, I must accept responsibility for them. The first scheme is the Federal German Compensation Law for Public Service. It gives restitution for loss of employment and loss of pension rights, which takes the form of annuities to replace the security rights or superannuation rights which individuals had and lost under Nazi rule. Since they are a replacement of income which would otherwise be taxable under the German Federal law, compensation payments under the first named scheme—which for short is called B.W.G. öD—are taxable, and it seems on the face of it that that is not an unreasonable position for payments of this kind. The other scheme is the Federal Compensation Law—BEG for short—which is compensation for the destruction of families, for the pain and the anguish, and possibly also for the loss of possessions and all that the imagination can grasp, if it can grasp in this terrifying situation.
After a very long time, the German Government apparently agreed to pay compensation, but not under the Federal Compensation Law, the scheme which, on the face of it, should have applied to this claim. Surprisingly enough, they awarded the compensation under the first of the schemes that I mentioned, the Federal Gorman Compensation Law for Public Service.
I now come back to the public service which this man had rendered, which was two years and five months in that Government Department in Prague. One would wonder what compensation would normally be payable for a man who lost his job at the age of 23 after having been in it for exactly two years and five months. Yet this man has been awarded an annuity of £30 a month. Clearly, this annuity cannot be compensation for the loss of a job at 23 years of age after less than two and a half years' service. What, then, is it for? It is for the claim which should have been admitted under the other scheme. One can then say that £30 a month is probably small enough for that. It might be too much for the loss of the man's job at the time, but under the second heading, involving family possessions worth, so Mr. Kollmann estimates, about £37,000 in prewar values, £30 a month is small enough compensation for that.
The dilemma of the Chancellor of the Exchequer in this matter is that at the time we passed the alteration to the Income Tax law in 1961 the Chancellor thought, and the House believed, that we had found the simplest and clearest way out of the dilemma which had been before the House on several occasions before the law was actually changed.
9.30 p.m.
If hon. Members look at Section 22 of the Finance Act, 1961, they will see what a simple remedy was prescribed. It was that if the Germans exempted this from their Federal Income Tax law we would also exempt it from ours. The Section does not go into the question of what scheme the compensation is paid under. No scheme is mentioned. The declaration is there—"if the Federal Government exempt it, we will follow suit".
That is how the matter was left and it seemed satisfactory enough at the time. Now we see that, in this case, it has not proved satisfactory. The hon. Member for Selly Oak says that there are a number of cases. I have had only one drawn to my attention, but that does not mean there are not more. This is a grievous problem affecting a very few people.
In our debate in Committee, the Chief Secretary to the Treasury suggested that if the Germans would change the classification of the award and put it under the Federal Compensation Law, exempting it from tax, our remedy would be simple. The case would then come within Section 22. Mr. Kollmann has been back to the Federal Government to ask them to do this. They say that no exception can be made in this case.
One wonders why it was that the Federal Government made an award under a scheme which seems inappropriate to the claim that Mr. Kollmann made, on condition that he surrendered all claims under the scheme against which he did claim. Why did they get him to sign away his claim under the Federal Compensation Law and give him an annuity under the Federal German Compensation Law for Public Service, in which he scarcely served and which is certainly not appropriate to the annuity of £30 a month? That puzzles me and

I do not know the explanation. If the Federal Government could be prevailed upon to change this classification, clearly it would satisfy the requirements of Section 22 but so far they have refused to do so.

Mr. Gurden: Every effort has been made to persuade the German Government to explain why they did this. They have all failed. The Federal Government have no reasons. This was simply done in a court of law without my constituent having an opportunity to be there.

Mr. Houghton: That confirms what Mr. Kollmann told me, which was that the reply he received from the Federal authorities was brief and said that it could not be done. No explanation was offered. It seems strange that he had to sign away his rights under the scheme appropriate to his claim by a declaration on oath, made in this country, which was a firm legal renunciation of his rights under the Federal Compensation Law, for the return of an annuity of £30 a month under a scheme against which he had no valid claim.
What are we to do about it? The Federal authorities refuse to change the classification. Are we then to stand by the literal terms of Section 22 and say to Mr. Kollmann, "Bad luck"? I do not think that the House can leave the matter at that and I beseech the Financial Secretary to take it most seriously. The emotions and feelings of the House are deeply aroused on matters of this kind. We want to see an end of such cases because we do not want individual anxiety to be prolonged and a condition of disputation and unhappiness all round.
It was suggested in Committee—and this attracted me at first sight—that the Chancellor of the Exchequer might make this an extra-statutory concession. Could he not issue a direction to the Inland Revenue under the Income Tax Act? I do not think that the Comptroller and Auditor General would take serious exception to that. I can offer the suggestion only with some hesitation, because I know how reluctant—rightly so—the Chancellor of the Exchequer and the Inland Revenue are to tamper with the law in individual cases, however sympathetic towards them they are.
However, surely the law can be bent or changed, one of the two. If the Chancellor of the Exchequer cannot bend the law, I beseech the House to change it, and here is the opportunity. If I may say so with great respect to the hon. Member for Selly Oak, he has been too mild about it. He should have been battling with vigour and determination to see this injustice remedied. I am trying to add something to the representations which he has made over recent months with moderation and with courtesy and with all the qualities which we know the hon. Member to possess. Now he has passed the matter to the House and we have the responsibility of deciding what we shall do with his constituent's grievance, because it is a grievance.
Mr. Kollmann has taken the proper steps open to him under the Income Tax Act. He has appeared before the Commissioners, perhaps little knowing that the case was bound to go against him under the provisions of Section 22 of the 1961 Act. So he lost his case and the assessments over a number of years were confirmed. The total amount of tax which he has now to pay on the annuities which have been granted to him must seem like squeezing the very blood out of him at this stage.
I therefore hope that it will be possible for the Financial Secretary to offer some comfort and reassurance to the House, to the hon. Member and to his constituent, and to say that an effort will be made to find some way out of this difficulty and that if the German Government—and we know what problems it has—does not feel able to adjust this matter to facilitate the exemption of this annuity under our own Income Tax law, in these special circumstances we should exempt it ourselves in the interests of justice. No valid explanation has been given by the Federal German authorities to show why they have compensated Mr. Kollmann under a taxable scheme when his claims were under a non-taxable scheme.
I sincerely trust that this time we shall hear something more favourable than we heard last time. If we do not, I hope that the House will register its view.

Mr. Anthony Fell: I congratulate my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) on raising this matter. I am sure that the

hon. Member for Sowerby (Mr. Houghton) did not mean to imply that my hon. Friend had not battled. Had he not been battling, he would not have gone to the hon. Member for Sowerby.
This is a matter which the House takes most seriously, and which is way above partisanship of any sort. When one considers that this man was a Czechoslovak and when one considers that Britain, together with certain other European nations, could hardly opt out of any responsibility for the fate of Czechoslovakia in those dreadful years, in a case like this we have to use not only humanity, but common sense and conscience. Just because it is difficult is no argument for not doing something about it.
I am certain that my hon. Friend, who is as humane a man as I know, has been seeking ways to put this right. I hope that he has succeeded and that he will not put us in a difficult position over this case. I say that because some of us would be in an extremely difficult position. I hope that something will be done to help my hon. Friend.

Mr. Green: My hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) has pursued this matter with characteristic persistence, and with great courtesy, too. I know that he has the sympathy of everybody who thinks about this matter at all.
The hon. Member for Sowerby (Mr. Houghton) put his case with his usual steam. Obviously this is a very difficult matter which commands, and must command, a great deal of sympathy for the person involved.
Let me remake the points which have been made already. There is no quarrel that the 1961 Agreement was an intelligent, sensible one, and that in general terms it was all right. I think that my hon. Friend agrees with that. There is, further, no question of compensation that is received in a taxable form being subject to double taxation. What does arise is the strong suggestion—and I hope that I may be pardoned for saying that it is no more than a strong suggestion, because I am not in a position to judge it here and now, though my hon. Friend believes that it is more than a suggestion and considers it to be a fact—that this man has been awarded the wrong kind of compensation. This is where our dilemma arises.
I am not able to say here and now—I wish that I could—that this man has been awarded the wrong compensation. Although the hon. Gentleman has studied the case in great detail, and would go into the lists to say so, I do not think that the hon. Member for Sowerby could assert that this man was paid the wrong kind of compensation. The hon. Gentleman is able to say that there is a strong supposition that he was, as he told the House tonight and gave the reasons for saying so.

Mr. Houghton: I think that the supposition is strengthened by the fact that before they would compensate him under the wrong scheme they asked him to sign away his rights under the right scheme.

Mr. Green: I know that the hon. Gentleman will forgive me if I say that I cannot comment on that. I am certain that I would be wrong if I did. It is a strong supposition. I am certain that we shall get into great difficulties if I start discussing that particular merit, or lack of merit, because I do not have the detailed evidence before me. Nobody has it at this moment. I am not trying to evade the issue. I do not want to argue a case which it is not within my capacity to argue at this moment. I believe that we shall get into trouble if we go about it that way.
The problem here is that if we changed the law unilaterally in this case, I do not know whether it would upset other people who have also accepted compensation which is taxable. They would be able to say, quite rightly, that if they had claimed in the wrong way off the German Government, then the law of this country unilaterally could put them right too, and give them tax-free compensation whether or not their cases were arguable. This is the difficulty that confronts my right hon. Friend the Chancellor in his examination of the Clause.

9.45 p.m.

Mr. Gurden: I am quite sure that my hon. Friend has overlooked the fact that the Clause provides
that the recipient thereof has renounced such further or other claim or claims as he might otherwise have possessed for tax-free compensation …
It would be an extraordinary thing if it turned out that a mass of similar cases had not come to light.

Mr. Green: That is not the point. Before the Clause appeared on the Order Paper people had acted in a certain way. If we passed the Clause would not they wish to have acted in a way that would allow them to take advantage of it? That would then be their grievance. That is where the anomaly and the difficulty arises. If this were not so I imagine that in this case the difficulty would not exist, and we should not have this argument of deep pathos and real difficulty.
The offer made to my hon. Friend is that if he will see my right hon. Friend the Chief Secretary and have a talk with him about the matter at least the possibility is posed—which seems to me to be well worth considering before we create an anomaly in our own otherwise quite satisfactory law—that it may be possible to approach the German Government to get the fault righted where it is so strongly suggested that the fault lies, namely, the German judgment of the kind of compensation which should have been awarded.
I invite the House to see whether we cannot tackle the problem from that angle. I appreciate the point made about delay, but I am sure that it will be more satisfactory to tackle the matter in that way than to create an anomaly in what is generally accepted to be our good law. I would rather my right hon. Friend talked on this basis, so that we could see what could be done.

Mr. Norman Dodds: In view of the fact that this is a scandalous injustice, and that it creates a dilemma, why have not the Government already made these representations? If they have, what was the result? Why have not they done this already?

Mr. Green: The individual has made his own representations, as I understand it from my hon. Friend, and has not been successful.

Mr. Dodds: It should be for the Government.

Mr. Green: I am not too sure that the hon. Member's intervention is particularly helpful at the moment. The offer is made for my hon. Friend to talk to my right hon. Friend the Chief Secretary in order to see whether we can advance the matter further in Germany, which seems to be the proper place to


do so. I invite my hon. Friend to proceed in that way first.
I agree that this is a very difficult matter, and that it arouses great sympathy. I hope that we may have another go at it on the terms that I have suggested, rather than go to the length of creating an anomaly in our own law, the repercussions of which I cannot estimate. They may be very small, but they may be quite large. I realise that strong emotions are involved here, and I am trying not to stir them up wrongly. I am trying to offer a way of tackling the problem which I believe is a better way. That is the only opinion that I can give to the House with any honesty.
The matter is in the hands of the House, however, and I am not pretending that a great issue is involved—but I believe that if we accepted the Clause we might be doing some damage that could be avoided. I hope that my hon. Friend will accept the offer that I have made.

Mr. A. Lewis: The suggestion made by the Minister is admirable, but in view of the fact that this was discussed in Committee he must have known for some time that a new Clause had been tabled. What approaches have the Government made during the weeks since the discussion in Committee? Can the Minister say when he made an approach and what was the view of the Federal German Government? What further steps does he propose to take if, as would appear to be the case, the Federal German Government will not act?

Mr. Green: The invitation to my hon. Friend was that he should talk to my right hon. Friend the Chief Secretary on this matter. That invitation was made during the Committee stage. I am not directly involved in this, at least not at the moment, but if I understand aright that meeting has not yet taken place. I hope that it may take place very quickly. Until it does, I think that it would be difficult for any further action to be taken.

Mr. David Weitzman: I find the attitude of the Government, as revealed in the answer by the Financial Secretary,

an extraordinary one. The Minister recognises that an injustice has been done. Apparently it is thought that the remedy is to go to the Federal German Government and to say, "Please help us by putting this right. If you do, we shall be able to put ourselves right."
As was said by my hon. Friend the Member for West Ham, North (Mr. A. Lewis), there has been time for the Government to make representations about the matter. I assume that they were aware of the efforts made by the hon. Member for Birmingham, Selly Oak (Mr. Gurden) and know the details of the case. I assume that they are aware of the efforts of this gentleman to get the Federal German Government to move in the matter. We have heard the answer of that Government, without any explanation, that they refuse to do anything at all to remedy this situation.
I have heard tonight for the first time the details recounted by the hon. Member for Selly Oak and by my hon. Friend the Member for Sowerby (Mr. Houghton). It seems clear that here is someone who has been asked to sign away his rights under a claim made under the Federal German compensation law. I gather it is admitted that had a payment been made, there would have been no question of taxation with reference to the amount he received. He has been asked to sign away his right and, in return, he receives an annuity.
If that is the case—and the Minister does not dispute it—surely there is an obvious injustice and the Government—representing that British justice which is our proud heritage, and recognising that we always are ready to cure an injustice—will put it right. If the Government do not put it right, surely this House should register a protest in a way which would compel the Government to do so. It seems extraordinary to me that we should have to depend on the Federal German Government to do something before we are ready to remedy what, on the face of it, appears an obvious injustice.
I hope that the House will register a protest in the most emphatic terms, if the Minister is not prepared to give way.

Sir H. d'Avigdor Goldsmid: This problem to which hon. Members have addressed themselves with such vigour


and so much human sympathy is a very old one. I can claim to have been personally engaged very deeply in these matters for upwards of 15 years.
I think I can perhaps help my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) by saying that there can be no question that Mr. Koll-mann had in fact no legal claim at all on the German Government. The German Government have at all times refused to recognise claims emanating from people who were not originally living within their boundaries. This is an important point because, if there is no legal claim, what happened between the German Government and this gentleman is something about which none of us is in a position to be dogmatic. I know this case and will not say anything more about it than that.
I congratulate my hon. Friend for having taken it up, but we have to recognise that what the German Government have done in the case of former State employees who lost their jobs in 1933 as a result of Hitlerism has been to reinstate their pensions at the rate they would have received had they continued all the time in State employment up to the date of their retirement. In most cases if a man had been forcibly retired in 1933 with 30 years' increments, very substantial pensions are now being paid by the German Government.
If we were to accept the form of words in the Clause it might be up to almost every single person in receipt of an annuity to raise the question of whether or not he accepted it under duress. This is a serious problem we have to live with. There is this great twilight zone about the conditions under Nazism. Former officials have testified that there is much information, but also a great deal of misinformation. The German Government in the cases to which their attention has been directed have been extremely sympathetic. It was Dr. Adenauer's philosophy that he would rather that claims which were not 100 per cent. valid should be met than that any genuine claim should be dismissed. That being the attitude of the German Government to their former citizens, it is highly regrettable that they have not been willing to do anything for those whom they do not consider to be their citizens. That is the legal position.
I find this an extraordinarily difficult case. It is only fair to say to the Financial Secretary that, having worked in these matters for many years, I shall not be able to vote against any proposal in this House to do something to help people who have been victimised, but, having said that, I think that the danger in passing this Clause in this form is very real and hon. Members should be made aware of it. It would be easy to make it possible for a large number of cases to be reopened, I suspect at the expense of the taxpayer.

10.0 p.m.

Mr. Gurden: I speak again with the leave of the House. I want to clear up one or two points which have arisen. I thank my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) for what he has said. I know that he great knowledge of these things. Surely he could not have missed the point that although, as he said, this annuity, compensation, or whatever we call it, is paid for loss of office my constituent has not received a single penny in respect of the £37,000 which his relatives lost. I accept a good deal of what he said. I know that he is an expert.
My hon. Friend the Financial Secretary to the Treasury said that there is a good deal of supposition in the case. This hurt me, because I had not wished to take up time to show all the proofs which can be shown and I have not brought all the papers into the House with me, but I assure my hon. Friend that a good many of the things which he said were suppositions are facts. It is a fact that Treasury officials have begged me and begged Mr. Kollmann to keep applying to the German Government to put this matter right. We have gone all through this exercise. I hoped that my right hon. Friend could persuade the German Government to think again, but that is the advice which we have had for years from the Treasury—to apply to the German Government. What shall we do after tonight if we do not put it straight? Although I am sure that there is good will on the Front Bench, this is a waste of time, and I cannot see that these people, including Mr. Kollmann, can get any joy out of our Government or anyone else appealing to the German Government.
The reason that they paid this compensation at £30 a month is obvious. It was better than paying out a huge capital sum. That is the simple reason. It was far better for them to spread this over the period of years of his life up to the time of retirement. I do not think that we have had very much help tonight. I am sorry that my hon. Friend does not realise the facts as they are. They are as bad as I have said they are. The House will have to decide.

Mr. Fell: My hon. Friend knows that I am very much with him in this case. But if he had an assurance from the Treasury Bench that pending the result of the Government's inquiries, if they were able to go to the German Government, no tax should be charged, and that if there were no success in their efforts they would re-examine the position, would he feel that this was a sufficient assurance?

Mr. Gurden: This would be a very happy solution, and this is all that I have asked. I know that my constituents and others would be quite happy to let this go for a while. After all, it has been going on for a number of years, and it could go on for another 12 months if one had that assurance.

Mr. Diamond: As the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, this is a very difficult position. Nobody wants to reach a conclusion hurriedly, or emotionally, but we have to reach a conclusion. That is what the House is for and what the debate is about. We have to reach a conclusion now, because we are at the final stage of the Finance Bill. It is not open to us to say, "We should be grateful if the Government would consider the matter and bring it forward at a later stage of the Bill", for that opportunity has gone.
We recognise that this is not a party or partisan issue, and we are faced with the fact that we have to make up our minds now. We might have said that this was not fair on the Government if the Government had had no knowledge of the feeling of the House or of the facts involved, but the hon. Member for Birmingham, Selly Oak (Mr. Gurden) has been pressing this matter for a long time. His constituent has written to my hon. Friends and to me and I dare say to other hon. Members, and the matter has been well known for a very long time.
The difficulties are not new, the dilemma is not new. All that is new is the suggestion that now, at ths latest hour, we should leave it for the hon. Member to see his own Minister. This is nothing for us to get hold of. No one wants to force the issue in a case such as this, but we are compelled to do so. The Government are forcing us to force the issue because they have left it to the last moment to say anything—and what they have low said is of no real value to us.
The Government are saying, "We are in difficulty. We have to weigh justice against administrative convenience. We would rather we did not have to reach a solution on this. We would rather you put the problem back in the hands of the German Government and let them solve it, and let them solve it in a way which coincides with Section 22 of the Finance Act, 1961 and leaves us, the Government, with no problem to decide". That would be very easy for the Government, but that is not the problem before us.
We must make a decision. There is no reason to believe that at this late stage the German Government would alter their mind. The German Government might very well find themselves in certain difficulties. They might well find that it was possible to make payment only in this form. Any undue pressure might result in circumstances much more damaging to the hon. Gentleman's constituent than the situation is now.
We just have to reach a solution and we have to come to a conclusion. The only argument then left for the Government is that this would make some other people, who have had their cases and their tax position settled, jealous. It will certainly not make their position any worse than it is at present. It will not do them any damage. It may stir certain emotions. If the Government feel that the emotions which will be stirred are too strong for them to withstand, they can deal with those persons also in the way provided in Section 22.
I remind the Financial Secretary of the provisions of Section 22, which is the Section giving relief:
(2) This section shall be deemed always to have had effect, and any necessary repayment of tax shall be made …
In 1961, the Government deliberately said, "We shall repay tax". If the


Government feel that, as a result of their accepting the new Clause, others would be caused a serious injustice, the Government have it in their power to deal with that injustice.
There is no real money involved. This is not a question whether the country can afford it. This is a question of justice, upon which we all feel deeply. The last thing any of us on this side want is to have a Division, which can be misunderstood. Therefore, I want to make it absolutely clear that it is simply on the issue that this is a real injustice, that this man would have received money free of tax had he received it in a different form, that there is no real difficulty in terms of the Government's financial situation to prevent it being done, and that the machinery for retrospective relief from taxation is already provided for.
In these circumstances, recognising that there is cross-party support for the Motion, we on this side are bound to say that the answer the Government have given at this late stage is no answer at all, and that we must fight for justice.

Mr. Boyd-Carpenter: I regret that, owing to an inevitable engagement outside, I have not heard the greater part of the debate. I am very familiar with the issue, since, as the House may recall, I took part in the discussion on a similar Clause moved in Committee by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden). If I may say so, having studied the case, I fully understand my hon. Friend's feelings about this case, for it is a difficult one and the facts are far from being clearly established.
What the House has to deal with is not only—not that I under-rate it—a decision on an individual case, however hard and difficult, but also the issue which is now before us, whether we should alter our own law. That poses very difficult problems. As my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), who, as the House knows, has great experience in this matter and has done a great deal of extremely unselfish work on the subject, pointed out, if the general law is altered one affects not only one case but all others, including those which have been settled and which

this would reopen. That is itself quite a serious thing to do and one which the House would feel disposed to do only if it were satisfied that there were no other conceivable means of dealing with the individual case about which hon. Members on both sides of the House are concerned.
It not only would alter the law in respect of cases which have been settled, but would introduce a difficult new position, creating new anomalies in our law. As I understand it, my hon. Friend wishes to exempt from tax recipients of this compensation in this category who have had refused or have given up their rights in respect of compensation in some other category. It would not, as I understand it, benefit those in this category whom we have always dealt with in this category; and it would introduce a new distinction between those in this category who, as a result of discussion, negotiation, or a decision of the German Government, have been put in this category, whichever category they thought they should be in, while it would leave subject to tax in this country those who have always been in this category. That would create very serious anomalies.
When we discussed this matter in Committee I suggested that the right thing to do in the circumstances, if the position was as my hon. Friend and his constituent maintained—that this gentleman was in the wrong category—would be to seek to persuade the German Government of that fact. [HON. MEMBERS: "Oh."] This is so. And if one is successful in so doing then, automatically, the tax consequences, as the Financial Secretary explained, follow in this country. I ventured to suggest in Committee that my hon. Friend should have a word with me about this between that stage and now. He did not apparently feel able to arrange a talk with me, which is entirely his business.

Mr. A. Lewis: Why did not the right hon. Gentleman arrange it?

Mr. Boyd-Carpenter: I am sure that if hon. Members opposite pause to think they will realise that this is a matter which my hon. Friend, to his great credit, has studied and about which he probably knows more than any other hon. Member. I thought, and I still think, that one would have a better


chance of assessing the chances of persuading the German Government that they were, as my hon. Friend thinks, wrong if my hon. Friend would put his knowledge of the case in discussion to myself, the Financial Secretary or others of my colleagues so that we could have the advantage of his knowledge and argument, if necessary to put to the German Government.
Although I appreciate the difficulty which the hon. Member for Gloucester (Mr. Diamond) fairly put, I still suggest that we should not make a considerable alteration in our law, creating new anomalies while, perhaps, remedying one, unless we were absolutely convinced beyond peradventure that there was no hope of putting right what according to my hon. Friend is the basic wrong; that is, the wrong categorisation of this claim by the German Government.

Mr. Gurden: We should get this matter cleared up. As to my seeing my right hon. Friend, I am, of course, grateful to him for his continued invitation. I did take the matter up, but the reason we have not met to consider it is simply that there was a slight misunderstanding. I spoke to his secretary on the telephone and I still hope to take advantage of his offer. I have reminded the House that this exercise has been gone through before, in correspondence and telephone calls, and that the Government have had an opportunity—at least the civil servants have—of dealing with the German Government. I cannot blame my right hon. Friend for this, because he was not in office at the time, but I can assure him that the Government have had ample opportunity to deal with this matter.

Mr. Boyd-Carpenter: I appreciate what my hon. Friend says and I hope that he did not think that I was holding it against him when I said that he had not taken advantage of the invitation which I extended to him. I am glad to hear that he still wishes to accept it. It seems to me that this is the right way to handle it.
10.15 p.m.
I can understand the feelings of my hon. Friend the Member for Selly Oak, because I too, like I think most hon. Members, have fought individual constituency cases for a long time. I believe

that many of us have had that experience and have found it a very useful one. But my hon. Friend also accepts that I came fresh to this matter when I had the privilege to reply to him in Committee. The offer which I made to him then, and which I repeat now, was a sincere one. I should like to discuss the matter with him with a view to seeing whether we are in a position to make representations to the German Government to put right what he thinks is wrong.

Mr. Diamond: As this is the sole point on which the right hon. Gentleman is basing his case, am I not right—and I would crave the attention of the hon. Member for Selly Oak for a moment—in saying that this matter has been going on for over a year? I had representations from the hon. Member's constituent more than a year ago. Is it not right that this has been going on for more than one year and has covered more than one Finance Bill? If so, how can we at this late stage of the Bill attach any importance to the right hon. Gentleman's suggestion?

Mr. Boyd-Carpenter: The hon. Gentleman says that this is the only point that I rest my case on. It certainly is not. I addressed some remarks—and I should be guilty of tedious repetition if I repeated them—to the general effect on our tax law of making the change suggested in this new Clause. I had reached that point in my argument, which I think was accepted by the House, that the only argument in favour of making this change was the hardship in this case.
I was addressing myself to the problem—and I hope that the House does not think that it was an unreasonable approach—as to whether this was the only way of dealing with this case. It is still an open matter whether it is right to create new anomalies to remedy this one. We could argue about that at some length.
When the hon. Member for Gloucester intervened, I was addressing myself to the different point of whether this was the only way to deal with the matter. I do not think that any hon. Member who has pursued a constituency case will regard the fact that this has gone on for some time as a reason for feeling that it is hopeless to pursue it further. I have never taken that view, and I do not imagine that many hon. Members have.


I still think that it would be of great value, before taking what would be the very serious step of altering our law, if my hon. Friend would let me have the advantage of his knowledge of this case and of the arguments which have convinced him that his constituent has been placed in the wrong category by the German Government.
I have had a certain number of dealings with the German Government on wider matters. That Government is manned by reasonable people who are prepared to be helpful if a reasonable case is put to it.

Mr. A. Lewis: Why did not the right hon. Gentleman put it?

Mr. Boyd-Carpenter: I have never had the opportunity to do so.

Hon. Members: Nonsense.

Mr. Lewis: The Minister has talked about the possibility of an approach being made to the German Government. I suggest that he knew at the time of the Committee stage, and has known since, that this matter was still pending. Why did not he take the initiative and go to the German Government? He knew all about it.

Mr. Boyd-Carpenter: The hon. Gentleman is wrong, as he so often is. [HON. MEMBERS: "No."] I did not, and I do not, know all about it.

Mr. Dodds: Then find out.

Mr. Boyd-Carpenter: As I have said, my hon. Friend the Member for Selly Oak probably knows more about it than any man in the House.
I ask my hon. Friend the Member for Selly Oak to come and discuss the matter with me and to give me the arguments and material with which it would make sense to approach the German Government. My hon. Friend, for the reasons which he gave and which I fully understand, has not yet been able to do that. He has said tonight that he is willing to do that. I am prepared to tell the House that if my hon. Friend will do that and will give me the relevant material I will see that every effort that we can make on behalf of Her Majesty's Government to

put the case to the German Government is made. It still seems to me that that is the right way to handle this difficult matter, but I fully understand the concern of the House about it.

Mr. Houghton: I can speak again only by leave of the House, but I crave the opportunity of making one or two concluding remarks. I hope that the House will settle this matter now and will not be afraid of the new Clause and of the possible consequences on other cases.
In the first place, I think that the hour is too late for fresh approaches to be made to the German Government to alter the classification of this award. It may be true, as the hon. Baronet the Member for Walsall, South (Sir. H. d'Avigdor-Goldsmid) said, that the German Government made the award under this particular classification because they were not free to make an award under the other classification to a non-national and non-resident. Nevertheless, the proper classification of this annuity is undoubtedly for losses and the destruction of the man's family, and so on.
The Clause makes the concession only in those cases where the persons concerned have accepted compensation under one classification on condition that they renounced their claims under the other. I cannot conceive that there will be many cases in that category. I know personally of only one. I hope that the House can feel that if it passes the Clause it will not only be disposing of this case, which otherwise will be hanging about for 12 months at least, but also disposing of other cases, small in number as I believe, where payment has been made under one category on condition of renunciation of claims under another.
Let us conclude this matter, let us face the issue, and not have this and other cases on our consciences any longer.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 147, Noes 179.

Division No. 126.]
AYES
[10.23 p.m.


Ainsley, William
Allen, Scholefield (Crewe)
Benn, Anthony Wedgwood


Alldritt W. H.
Awbery Stan (Bristol, Central)
Blackburn, F.


Allaun, Frank (Salford, E.)
Beaney, Alan
Blyton, William




Bottomley, Rt. Hon. A. G.
Harper, Joseph
Oram, A. E.


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Hayman, F. H.
Padley, W. E.


Bowen, Roderic (Cardigan)
Henderson, Rt. Hn. Arthur (Rwly Regis)
Pavitt, Laurence


Braddock, Mrs. E. M.
Herbison, Miss Margaret
Pearson, Arthur (Pontypridd)


Bradley, Tom
Hill, J. (Midlothian)
Peart, Frederick


Broughton, Dr. A. D. D.
Hilton, A. V.
Pentland, Norman


Butler, Herbert (Hackney, C.)
Holman, Percy
Price, J. T. (Westhoughton)


Butler, Mrs. Joyce (Wood Green)
Holt, Arthur
Probert, Arthur


Carmichael, Neil
Houghton, Douglas
Rees, Merlyn (Leeds, S.)


Castle, Mrs. Barbara
Howell, Denis (Small Heath)
Rhodes, H.


Cliffe, Michael
Hoy, James H.
Roberts, Albert (Normanton)


Collick, Percy
Hughes, Cledwyn (Anglesey)
Roberts, Goronwy (Caernarvon)


Craddock, George (Bradford, S.)
Hughes, Hector (Aberdeen, N.)
Robertson, John (Paisley)


Cronin, John
Hunter, A. E.
Rodgers, W. T. (Stockton)


Crosland, Anthony
Hynd, H. (Accrington)
Ross, William


Cullen, Mrs. Alice
Hynd, John (Attercliffe)
Short, Edward


Dalyell, Tam
Irvine, A. J. (Edge Hill)
Silkin, John


Davies, Ifor (Gower)
Jay, Rt. Hon. Douglas
Silverman, Julius (Aston)


Davies, S. O. (Merthyr)
Johnson, Carol (Lewisham, S.)
Slater, Joseph (Sedgefield)


Deer, George
Jones, Elwyn (West Ham, S.)
Small, William


Delargy, Hugh
Jones, T. W. (Merioneth)
Smith, Ellis (Stoke, S.)


Dempsey, James
King, Dr. Horace
Stainton, Keith


Diamond, John
Lawson, George
Steele, Thomas


Dodds, Norman
Lee, Frederick (Newton)
Stones, William


Doig, Peter
Lever, L. M. (Ardwick)
Swingler, Stephen


Driberg, Tom
Lewis, Arthur (West Ham, N.)
Symonds, J. B.


Duffy, A. E. P. (Colne Valley)
Loughlin, Charles
Taverne, D.


Edwards, Rt. Hon. Ness (Caerphilly)
Lubbock, Eric
Taylor, Bernard (Mansfield)


Fell, Anthony
Mabon, Dr. J. Dickson
Thornton, Ernest


Finch, Harold
McBride, N.
Thorpe, Jeremy


Fletcher, Eric
MacColl, James
Wade, Donald


Foley, Maurice
McInnes, James
Wainwright, Edwin


Foot, Dingle (Ipswich)
McKay, John (Wallsend)
Warbey, William


Foot, Michael (Ebbw Vale)
Mackenzie, Gregor
Watkins, Tudor


Fraser, Thomas (Hamilton)
Manuel, Archie
Weitzman, David


Galpern, Sir Myer
Mapp, Charles
White, Mrs. Eirene


George, Lady Megan Lloyd (Crmrthn)
Mason, Roy
Whitlock, William


Ginsburg, David
Mayhew, Christopher
Wilkins, W. A.


Gordon Walker, Rt. Hon. P. C.
Mendelson, J. J.
Willey, Frederick


Gourlay, Harry
Millan, Bruce
Willis, E. G. (Edinburgh, E.)


Greenwood, Anthony
Milne, Edward
Winterbottom, R. E.


Grey, Charles
Mitchison, G. R.
Woodburn, Rt. Hon. A.


Griffiths, David (Rother Valley)
Morris, Charles (Openshaw)
Woof, Robert


Griffiths, Eldon (Bury St. Edmunds)
Morris, John (Aberavon)
Yates, Victor (Ladywood)


Grimond, Rt. Hon. J.
Noel-Baker, Francis (Swindon)



Gurden, Harold
Noel-Baker, Rt. Hn. Philip (Derby, S.)
TELLERS FOR THE AYES:


Hannan, William
O'Malley, B. K.
Mr. Charles A. Howell and




Mr. Redhead.




NOES


Agnew, Sir Peter
Courtney, Cdr. Anthony
Hall, John (Wycombe)


Allason, James
Craddock, Sir Beresford (Spelthorne)
Hamilton, Michael (Wellingborough)


Anderson, D. C.
Critchley, Julian
Harris, Frederic (Croydon, N. W.)


Atkins, Humphrey
Curran, Charles
Harris, Reader (Heston)


Awdry, Daniel (Chippenham)
Currie, G. B. H.
Harrison, Col. Sir Harwood (Eye)


Barber, Rt. Hon. Anthony
Dance, James
Harvie Anderson, Miss


Barter, John
Deedes, Rt. Hon. W. F.
Hastings, Stephen


Batsford, Brian
Donaldson, Cmdr. C. E. M.
Henderson, Sir John (Cathcart)


Bennett, F. M. (Torquay)
Doughty, Charles
Hendry, Forbes


Bidgood, John C.
Drayson, G. B.
Hiley, Joseph


Biffen, John
du Cann, Edward
Hill, J. E. B. (S. Norfolk)


Biggs-Davison, John
Duncan, Sir James
Hirst, Geoffrey


Bingham, R. M.
Eden, Sir John
Hogg, Rt. Hon. Quintin


Birch, Rt. Hon. Nigel
Elliot, Capt. Walter (Carshalton)
Holland, Philip


Bishop, Sir Patrick
Elliott, R. W. (Newc'tle-upon-Tyne, N.)
Hughes-Young, Michael


Bourne-Arton, A.
Emery, Peter
Hulbert, Sir Norman


Box, Donald
Emmet, Hon. Mrs. Evelyn
Hutchison, Michael Clark


Boyd-Carpenter, Rt. Hon. John
Farr, John
Irvine, Bryant Godman (Rye)


Boyle, Rt. Hon. Sir Edward
Finlay, Graeme
James, David


Brown, Alan (Tottenham)
Fisher, Nigel
Johnson, Eric (Blackley)


Bryan, Paul
Fletcher-Cooke, Charles
Johnson Smith, Geoffrey


Buck, Antony
Fraser, Ian (Plymouth, Sutton)
Kaberry, Sir Donald


Bullard, Denys
Freeth, Denzil
Kerans, Cdr. J. S.


Bullus, Wing Commander Eric
Gammans, Lady
Kerr, Sir Hamilton


Carr, Compton (Barons Court)
Gardner, Edward
Kershaw, Anthony


Carr, Rt. Hon. Robert (Mitcham)
Gibson-Watt, David
Kirk, Peter


Chataway, Christopher
Giles, Rear-Admiral Morgan
Lancaster, Col. C. G.


Chichester-Clark, R.
Gilmour, Ian (Norfolk, Central)
Legge-Bourke, Sir Harry


Clark, William (Nottingham, S.)
Glyn, Dr. Alan (Clapham)
Lewis, Kenneth (Rutland)


Cleaver, Leonard
Goodhart, Philip
Lilley, F. J. P.


Cole, Norman
Goodhew, Victor
Lucas-Tooth, Sir Hugh


Cooper-Key, Sir Neill
Green, Alan
MacArthur, Ian


Cordeaux, Lt.-Col. J. K.
Gresham Cooke, R.
McLaren, Martin


Corfield, F. V.
Grosvenor, Lord Robert
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs)







McMaster, Stanley R.
Prior, J. M. L.
Thornton-Kemsley, Sir Colin


Macmillan, Maurice (Halifax)
Proudfoot, Wilfred
Tiley, Arthur (Bradford, W.)


Maitland, Sir John
Quennell, Miss J. M.
Tilney, John (Wavertree)


Markham, Major Sir Frank
Ramsden, Rt. Hon. James
Touche, Rt. Hon. Sir Gordon


Matthews, Gordon (Meriden)
Rawlinson, Rt. Hon. Sir Peter
Turner, Colin


Maude, Angus (Stratford-on-Avon)
Redmayne, Rt. Hon. Martin
Turton, Rt. Hon. R. H.


Maudling, Rt. Hon, Reginald
Rees, Hugh (Swansea, W.)
van Straubenzee, W. R.


Mawby, Ray
Rees-Davies, W. R. (Isle of Thanet)
Vaughan-Morgan, Rt. Hon. Sir John


Maxwell-Hyslop, R. J.
Ridley, Hon. Nicholas
Walder, David


Maydon, Lt.-Cdr. S. L. C.
Ridsdale, Julian
Walker, Peter


Miscampbell, Norman
Roots, William
Walker-Smith, Rt. Hon. Sir Derek


Montgomery, Fergus
Ropner, Col. Sir Leonard
Ward, Dame Irene


More, Jasper (Ludlow)
Sharples, Richard
Webster, David


Morrison, Charles (Devizes)
Shaw, M.
Williams, Sir Rolf Dudley (Exeter)


Morrison, John (Salisbury)
Shepherd, William
Wills, Sir Gerald (Bridgwater)


Neave, Airey
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Wilson, Geoffrey (Truro)


Orr, Capt. L. P. S.
Spearman, Sir Alexander
Wise, A. R.


Osborn, John (Hallam)
Steward, Harold (Stockport, S.)
Wolrige-Gordon, Patrick


Page, John (Harrow, West)
Stoddart-Scott, Col. Sir Malcolm
Woodhouse, Hon. Christopher


Panned, Norman (Kirkdale)
Storey, Sir Samuel
Woodnutt, Mark


Percival, Ian
Studholme, sir Henry
Woollam, John


Pickthorn, Sir Kenneth
Talbot, John E.
Worsley, Marcus


Pike, Miss Mervyn
Taylor, Edwin (Bolton, E.)
Yates, William (The Wrekin)


Pitt, Dame Edith
Taylor, Frank (M'ch'st'r, Moss Side)



Pounder, Rafton
Teeling, Sir William
TELLERS FOR THE NOES:


Powell, Rt. Hon. J. Enoch
Thomas, Sir Leslie (Canterbury)
Mr. Peel and Mr. Pym.


Price, David (Eastlelgh)
Thompson, Sir Richard (Croydon, S.)

New Clause.—(SAVINGS (PAY AS YOU EARN).)

(1) From the fiscal year 1964–65 any employed person shall have the right so to alter his code number that more tax can be deducted each week under section one hundred and fifty-seven (pay as you earn) of the Act of 1952 than would be so deducted if the code number had not been altered. At any time during the fiscal year such employee would have the right to revert to his actual code number.

(2) As soon as possible after the fifth day of April in any years the Commissioners of Inland Revenue shall issue to each taxpayer a certificate showing the amount of any overpayment in the preceding year. Such certificates shall be immediately encashable at any post office.

(3) If such certificate is deposited in the Post Office Savings Bank, interest at the rate current for deposits in the Post Office Savings Bank per annum shall be allowed on the amount thereof from the preceding sixth day of April.

(4) The maximum amount that may be saved by each employee in any one year shall not exceed 10 per cent. of gross earned income in that year, or one hundred pounds whichever is the less.

(5) The first twenty-five pounds of interest on such savings shall be exempted from income tax.

(6) At the conclusion of each month the Commissioners of Inland Revenue shall transfer to the Post Office Savings Bank such an amount as in the opinion of the Treasury is the equivalent of the savings for the preceding month.—[Mr. W. Clark.]

Brought up, and read the First time.

10.30 p.m.

Mr. William Clark: I beg to move, That the Clause be read a Second time.
It will be remembered by the House that a similar Clause was moved on 3rd July, 1961, when we were fortunate in having the support of the Opposition Front Bench. No doubt tonight we may enjoy the same privilege. The arguments put forward on that Clause appear in column 1176 of the OFFICIAL REPORT of 3rd July, 1961. We should get it clear for the sake of subsequent speakers that this is a Conservative new Clause, and that the proposal was made as far back as 1955 at a Conservative Party Conference at Bournemouth.
What we must remember is the position and importance of savings in the country, particularly, as we have seen

since the end of the last war, with our method of deficit financing. It is salutary to remember that in 1945 the National Debt was some £21,000 million, and that in 1951 it had increased to £26,000 million—over the five or six years. I assure the Opposition that I am not necessarily making a party point. The National Debt has continued to increase because of our deficit financing, and the latest figures show that it is just over £30,000 million, it having increased by just over £4,000 million over the last 13 years because of deficit financing. If we compare the nearly £5,000 million in the six years between 1945 and 1951 and the just over £4,000 million in the subsequent 13 years, we get into perspective how deficit financing even under the present Administration has been less than under the Labour Administration after the end of the war.
No party can afford to ignore the small savers. Here again, the figures are indicative. Between 1945 and 1951, the total savings—and I agree that it was a difficult time—amounted to £558 million. Since 1951, the total is £14,300 million. In 1951, about £100 million a year was being saved whereas last year the figure was about £1,900 million.
All these savings are not made by millionaires. They are made by small investors. There are 3 million investors on the Stock Exchange and 1 million in unit trusts. I am sure that the Chancellor will agree that we cannot continue the capital expenditure programme unless savings—that is, small savings—remain as high as in the last few years.
What we need, however, is a new approach to savings. I am delighted that my right hon. Friend introduced the National Development Bonds but I wish he had grasped the nettle more firmly and given a tax incentive for all contractual savings, no matter what type. However, a step has been taken in the right direction.
We must remember that some people find it extremely difficult to save although they have the will. Through our P.A.Y.E. system, about 24 million people have code numbers. One is given a code number according to personal allowances and each week, depending on one's income, one's employer looks up the tables and deducts the tax


accordingly. For instance, one's code number may be 35, with a salary of £15 a week and tax at £2.
Surely it would not be beyond the wit of the Inland Revenue to extend this excellent machinery for collecting money to the collection of savings. It would be quite easy for that person on a code number of 35 to reduce it to 9 and instead of paying, say, £2 a week, to pay £3 a week instead. Through this manipulation he could pay £1 a week into savings. The beauty of such a scheme is that the saver would always have the money under his own control. If the saver found after a while that he could not save £1 a week but only 10s. he need only revert to a higher code number.
It should not be difficult to introduce such a scheme. I agree that it would be administratively difficult but only for the Inland Revenue. But the Inland Revenue should not be given the sort of consideration one necessarily gives to industrialists because, for the Exchequer, it is essential that our savings increase and anything that would give ease of saving should be operated by the Government.
The National Savings Movement does an excellent job in industrial savings. It has about 50,000 schemes throughout the country, covering about 3 million employees with savings of about £100 million a year. But we must remember that a firm cannot operate an industrial savings scheme unless it has at least 200 employees. If there are fewer than 200, such a scheme is not economic. It does not warrant the appointment of a savings officer to look after an industrial savings scheme. It should be remembered that many firms employ fewer than 200 people, so that, no matter how much good the National Savings Movement does, it does not catch those firms.
The Clause goes on to say that interest should be allowed. So that the Clause shall be kept in order, that interest has to be proposed at the Post Office rate of 2½ per cent., but that is a very low rate of interest. It also proposes an exemption limit of £25 for the interest. It is wrong that a man who saves through the Post Office should get up to £15 a year interest tax-free, while a man who saves through unit trusts does not get

the same exemption. There is no difference between the two kinds of savers. If a man prefers to save through the Post Office, let him do so, but if another prefers to save through unit trusts, he should have the same sort of exemption. I know that it is rather late in this Budget for my right hon. Friend to do anything about it, but I hope that he will think about this subject and do something for savers when he introduces next year's Budget.
Savings must be made administratively simple for the saver. I am sure that hon. Members opposite will agree with me that the next requisite is that savings should be secure. I hope that hon. Members opposite will forgive me if I say that their suggested wealth tax could not possibly give confidence to the small savers.

Mr. Houghton: Is there anything in the new Clause which would maintain the value of savings?

Mr. Clark: We must be careful about any suggestion that either side has done better than the other about inflation and maintaining value and so on. Speaking from memory, I think that during the six years of Socialist administration the £, valued at 20s. in 1945, fell to 15s., while in 13 years of Tory administration the £'s value has fallen to 14s. 10d., so that it took six years of Socialism for the £ to fall 25 per cent. and 13 years of Tory Government for the £ to fall by the same amount. The hon. Member for Sowerby (Mr. Houghton) should not make these accusations about the Tory Party, because the Tory record, however judged—inflation, fall in the value of the £, or any other way-is—but you would rule me out of order, Mr. Deputy-Speaker, if I did not return to the Clause.
When I gave way to the hon. Member for Sowerby, I was saying that savers had to have confidence and I mildly suggested that the suggested wealth tax of the party opposite did not give confidence. Introducing his annual once-and-for-all levy, the late Sir Stafford Cripps said that one could not continue to do this annually, because that would discourage savings. I am sure that hon. Members opposite will accept that that is what Sir Stafford Cripps said, and it is an indictment of their proposed wealth tax. I accept that, like many other parts


of Socialist policy, one never gets the details. One merely gets an announcement so that, rather as with the Short Titles of Bills, by reading only the title, it is very difficult to know what is inside.
10.45 p.m.
This is the second time that I have moved a Clause of this kind. The hon. Member for Sowerby said that he had been standing at that Box for 15 years—I hope that he will stand there for another 15 years—fighting for one thing after another. The inference to be drawn from that was that in the end he got his own way. I hope that my hon. Friend the Economic Secretary will be able to do something about savings before 15 years elapse.
I am delighted that he is going to reply to this debate, because I remember very well that when I moved a similar Clause on a previous occasion he was kind enough to support me. I would not like to suggest that it is a question of policeman turned robber, but I hope that my hon. Friend will hold out some hope that the Government are looking at the question of savings, and that through P.A.Y.E. they will be able to make it easier to save, and thus expand savings from their present high rate to an even higher rate so that we can get capital investment in this country and we can go forward knowing that a Tory Administration will maintain the value of the savings. If we can do that, I am sure that everybody will be satisfied, even the hon. Member for Gloucester (Mr. Diamond) who supported me last time.

Mr. Donald Wade: I listened with interest to the hon. Member for Nottingham, South (Mr. W. Clark). He says that he has been advocating this since 1955. I am sorry that he has met with so little success.
This proposal differs in a number of respects from a proposal entitled "Own-as-you-earn" which I have been advocating for many years, and which has been debated in this House from time to time.
I understand that under this proposal certain moneys would be set aside out of earnings through P.A.Y.E. Unlike the famous, or infamous, post-war credits, I gather than these savings would

carry some interest, and that the money would be deposited in the Post Office Savings Bank. No part of the savings would be invested in equities, and therefore that would limit the possibility of capital appreciation offsetting the fall in the value of money.
One of the problems with which we are continually faced when advising small savers is to explain how they would benefit from the capital appreciation which is to be gained from industrial shares, without risk. One is bound to point cut that the proposed form of saving would not gain any of the positive benefits which may be derived from investments more widely spread.
It is clear what the tax position is. It may be that I did not follow the hon. Gentleman when he outlined the proposals contained in the Clause. I take it that the saving is to be made out of income that has not suffered tax. If that is so, is there any point of time at which tax will be payable?
I support the proposal that the first £25 of interest should be exempt from Income Tax. There is a great deal to be said for applying the provisions at present applicable to the Post Office Savings Bank to a much wider measure of savings. During the Committee stage I advocated the extension of this principle to building society interest, and I therefore support this proposal to exempt from Income Tax a certain part of the interest on savings.
There is a much more ambitious scheme which I would advocate, but cannot discuss tonight, which would involve industrial shares and deferring the payment of Income Tax until the shares are withdrawn or sold. That would have considerable merits. The hon. Gentleman's proposal is a much more modest one, and I see no serious objections to it as a means of encouraging savings. I hope that at long last, after these many years of advocacy, he will be successful.

Mr. R. Gresham Cooke: My hon. Friend the Member for Nottingham, South (Mr. W. Clark) has made a powerful plea for National Savings and Post Office Savings, and has indicated the necessity for schemes such as this in order to create savings for Governmental purposes such as housing,


schools, nationalised industries, roads, and so on—all very desirable purposes. But in America there is a scheme somewhat similar to this, which is called the company thrift scheme, in which employees can set aside so much money every year out of their incomes, and to which their companies often contribute. That money can be applied not only to National Savings at the end of the year but also to the purchase of industrial shares, unit trusts and so on. Such a scheme helps both the Government and industry. I support my hon. Friend's scheme very warmly, but I ask my right hon. Friend the Chancellor to think more about the American precedent.
It is obvious that in the future we will have to have more savings, as the capital requirements of the nation grow, and we shall be able to get them only by means such as this—by deductions from salaries and wages at source—because people cannot be expected to wait until the end of the year and then put away £50 half as easily as they can be persuaded to have £1 a week taken from their salaries. I therefore ask my right hon. Friend not only to consider the general principle but also to ally it, if possible, with a wider scheme such as is operated in America at present.

Mr. Anthony Crosland: I intervene briefly to point out that there is no subject on which more mythological nonsense is talked by the party opposite than the subject of National Savings. Listening to the speech of the hon. Member for Nottingham, South (Mr. W. Clark) I felt that I was not in the real world at all. He talked about the National Debt increasing under a Labour Government. The National Debt was created by William Pitt the Younger, a Tory Prime Minister, in the early years of the French revolutionary war. It is entirely a Tory creation.
He went on to make a number of other dubious remarks. He said that he was on the side of the small savers, and that his whole speech was devoted to the interests of the small savers, and then he went on to say that their insecurity would be increased by the Labour Party's proposal for a wealth tax. Nobody but he imagines that the wealth tax is intended to deal with anything but the

minute proportion of rich savers. How on earth he imagines that it can have anything to do with the mass of small savers whom he has in mind is completely beyond me.
He said that if we had had more savings in the last few years we would have had more investment. The Chancellor would certainly give the lie to his hon. Friend on that. Investment has not been held back in the last few years by any lack of savings; it has been held back by a lack of incentives to invest.

Mr. F. M. Bennett: What is the Labour record on savings?

Mr. Crosland: I have been talking about the last few years. I was making the quite sensible proposition that investment over the last few years has not been held back by a shortage of savings but by a lack of incentives to invest. If the hon. Member for Nottingham, South, who I understand has good connections in the financial world—he is a well-known financial expert—wanted seriously to increase savings he would not come along with a gimmick new Clause, but would seek to deal with some of the serious impediments to savings imposed by the powerful financial institutions.

Mr. F. M. Bennett: What are they?

Mr. Crosland: Shut up.

Mr. William Yates: Will the hon. Member tell us what they are? We are interested in his argument.

Mr. Crosland: I was objecting only to one seated and one standing interruption. There are impediments to saving of a much more serious character than the hon. Member for Nottingham, South has suggested. Anyone who tries to save on house purchase in combination with borrowing from an insurance company is absolutely out of his mind. Before the term of the loan has run out if he wants to move to another house what alternative has he with the endowment insurance policy he has taken out? There are many ways in which we could increase small savings without using the gimmick suggested by the hon. Member.
The whole matter has to be treated more seriously without any of the politics involved—[HON. MEMBERS: "Oh."] There was a lot of politics in


the hon. Member's speech. The whole question has to be treated in a nonparty manner. We shall not get more savings if hon. Members merely throw around from one bench to another how the other party's policies militate against savings. The only way to get more savings is to treat the whole matter in a non-party manner, which the hon. Member did not do in his speech.

Mr. W. Yates: This has been an interesting debate. We should think of the moulder on the shop floor who, when the time comes for him to do a certain amount more work, analyses the matter and then says, "I shall not do more because I should then have to pay more in tax." This is simple shop floor logic. If we could provide a method whereby we could say to him, "If you do another four or five hours work the country will be grateful to you and you can keep more of the money for yourself", he would be glad to accept that. This Clause is a good one because it would get over the present mentality there is now on the shop floor. The worker would be able to save, and have his tax code altered by doing more work.
Subsection (3) says:
Such certificates shall be immediately en-cashable at any post office.
I do not quite understand how this would work. Presumably the tax would be reduced during the time he was saving and immediately he cashed the savings the code would revert to the original number. When I examined this, I wondered exactly what my hon. Friend the Member for Nottingham, South (Mr. W. Clark) envisaged would happen to the average person endeavouring to take part in a savings scheme of this nature. As a general principle applying to the country as a whole, a system should be worked out to encourage a person to save and have his code number reduced.
The Inland Revenue has never been interested in savings from Income Tax. We have to look at the basic principle on which the Treasury works. We cannot ask the Inland Revenue to consider altering taxation as a method of saving. The Treasury and the National Savings Movement are two completely different departments. The Revenue has the job of collecting money, and a Clause such as this which would reduce the amount

collected would not interest it. Therefore, when we consider methods of relieving taxation we cannot expect sympathy from the Treasury Bench. It is all right to suggest that money should be put into the Post Office or Development Bonds, but to ask the Treasury to apply a system which would encourage people on a shop floor to save through Income Tax would be completely beyond its understanding. Although I am in sympathy with the principle of the Clause, I do not think the Treasury mentality could understand it or attempt to apply it.

11.0 p.m.

Mr. Charles Loughlin: I am glad that the hon. Member for The Wrekin (Mr. W. Yates) intervened, because he has introduced a new character into our political life; instead of the mythical engineer we have the mythical moulder.
I have been associated with the trade union movement for many years, and I am fascinated by all these mythical industrial workers who decide at a given point that they will earn no more but will go home. It is a queer form of industrial organisation which lets its workers do that. In any event, I am at a loss to understand what it has to do with the Clause, and perhaps the hon. Member for Nottingham, South (Mr. W. Clark) will explain it to his hon. Friend or to me, as I read the Clause differently from the way in which his hon. Friend reads it.
The Clause is supposed to be an incentive to workpeople to ask their employers to deduct money from their wages. The hon. Member suggested that if a worker were taxed £2 a week, he could arrange with his employer to have £3 deducted, and that £1 a week would go into this savings fund. If we tell the workers "We will devise an easy way whereby you can save money," the incentive to them would not be restricted to the easy way but would be extended to that which they were likely to receive as a result of the payments.

Mr. Kenneth Lewis: What does that mean?

Mr. Loughlin: If the hon. Member will sit quiet a minute I will put it in simple terms. According to the hon. Member for Nottingham, South, the


Clause is an incentive in two ways. First, it enables the employee to arrange with his employer for a deduction at source. I suggest that there is reason to suppose that the worker in industry will ask, "What do I get in addition to the simple incentive of deduction at source? What interest shall I get?" The hon. Member for Nottingham, South tells me that there are two ways in which the worker can have the money credited to him. First, at the end of the tax year he will be presented with a certificate encashable at the Post Office, and if he deposits the certificate in the Post Office he will receive the current Post Office rate of interest. What does he get in the first year? If he decides, having saved a certain sum week by week, to cash his money after the first year, does he get any interest on his saved money? The answer is "No" and it is obvious that this is no incentive at all.
Is the industrial worker to be told, "Here is an incentive. You can save your money. We will look after it for you, although you will get no interest on it. On the other hand, if you walk down the street and save it in unit trusts or the bank you will get interest on it in the initial period"? Does the hon. Member for Nottingham, South think that industrial workers are fools? It is obvious that this is no incentive, but just a veil designed to enable the hon. Member for Nottingham, South to make some cheap political propaganda on the floor of the House. It will stand him in no good stead, for he will not be here after October.

Mr. Millan: I had not intended to intervene, but I do so following the remarks made by my hon. Friend the Member for Grimsby (Mr. Crosland). I do not believe that even the hon. Member for Nottingham, South (Mr. W. Clark) put this forward as a serious proposition. If he did, and if the Clause has been going around in its present form since 1955 I am surprised, because anyone reading it can see that it is full of practical defects. A Clause of this sort could not possibly work in practice. Since I give the hon. Member for Nottingham, South credit for having a considerable knowledge of our P.A.Y.E. structure, I cannot believe that he considers that this proposal would work.
The hon. Member for The Wrekin (Mr. W. Yates) could not have been more wrong in the illustration he gave about a proposition of this sort acting as an incentive to a worker to work overtime by placing some of the money earned in overtime in a savings system of this kind. It would have the opposite result, because a scheme of this sort would automatically reduce the worker's code number and thereby reduce the allowances granted for P.A.Y.E. purposes. Such a worker would, for his overtime, pay at a higher marginal rate of tax than under the present P.A.Y.E. system. Far from acting as an incentive by giving him more in his pay packet, the worker would find himself paying substantially more in tax than at present. I make this point in an effort to demonstrate one of the defects of this proposal but not as a really serious point, because I cannot regard this as a really serious proposal.

Mr. W. Yates: I cannot say what my hon. Friend the Member for Nottingham, South (Mr. W. Clark) thinks about the seriousness of his proposal. All I said was that, as a result of discussing this matter with the sort of people I had in mind, it seemed that if there were a system of this sort in operation it would enable them, when working overtime, to have their code numbers automatically reduced, and that would be a means of saving. This would, I suggest, be a good thing for the country. I said no more than that.

Mr. Millan: I have no doubt that the Clause was tabled with good intention, but on this sort of occasion I always recall what Bernard Shaw said about good intentions. I think his remark applies to this suggestion.
The remarks of the hon. Member for The Wrekin have no bearing on the Clause because of the obvious defects of the proposition. Consider, for example, subsection (4)
which provides a maximum which it would be almost impossible to work out in practice. If the hon. Member knows anything at all about how P.A.Y.E. works he will know that it is impossible to calculate what a change in a code number would mean in taxation liability over a year, because one must first know what the total income would be and one cannot estimate that at the


beginning of the year. Therefore subsection (4) means nothing. The idea that one can change back and fore from one code number to the other, as the hon. Member wishes, is nonsense, because P.A.Y.E. works as a cumulative system and the taxpayer would have to choose the code at the beginning of April.
There are all sorts of other technical difficulties. There is the question of a certificate of over-payment and how the Inland Revenue is to distinguish between overpayment because of mistakes in personal allowances and because of voluntary choice by the taxpayer of a lower code number than the one to which otherwise he would be entitled.
It is an appalling waste of the time of the House that this kind of thing should come forward year after year. There is nothing in it in the way of encouraging workers to save that cannot be done under the ordinary industrial savings schemes which operate in thousands of factories. We all want to encourage these and if anybody were to come forward with ideas for the Government to encourage the growth of industrial savings schemes one would treat his views with respect. I agree very much with my hon. Friend the Member for Grimsby that, quite apart from the wider considerations of savings, where the hon. Member for Nottingham, South was misleading in his opening speech, this is a gimmick and not worthy of the attention of the House

The Economic Secretary to the Treasury (Mr. Maurice Macmillan): The House will be aware that I was familiar with this Clause in another capacity or, if I may so put it, in a previous incarnation where one could ignore its imperfections and concentrate on its merits. I do not intend to ignore the merits of the general case put by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) but I must concentrate on the imperfections of the Clause, some of which have emerged in the debate.
My right hon. Friend the Chancellor of the Exchequer is sympathetic to the general idea underlying the Clause, that is the encouraging of savings, and small savings in particular. He showed that sympathy in his Budget speech but, as the hon. Member for Grimsby (Mr. Crosland) pointed out, and I hope he will forgive me if I do not follow him

into the detail of his economic argument, the need is for a broader approach. I believe that my hon. Friend the Member for Nottingham, South would also agree. This is what underlay the Chancellor's intention to go into the matter, and initially to examine contractual savings under the National Savings Movement.
I hope that the hon. Member for Grimsby will agree that future investment will require more savings and that it may be a good thing for social and economic reasons if saving includes small savers, particularly in order to avoid the greater part of our financial structure being in the hands of large institutions. The hon. Member quoted one form of savings as unsatisfactory and I think that he was saying that the time had come to look again at some of the methods already provided for small savers so as to make certain whether they are or are not as well suited as they should be to modern conditions. We have seen certain shifts in emphasis already with the growth of special departments—the trustee savings banks, for example—and there are various criteria which must be met, including, for instance, the need for liquidity for small savers and, equally, some form of incentive for long-term saving. The idea contains the contractual, tax relief and P.A.Y.E. elements.
11.15 p.m.
The hon. Member for Huddersfield, West (Mr. Wade) pleaded for a variation. When he and my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) got going, I began to think that there would be nearly as many savings schemes as there were speakers in the debate. The hon. Member referred to the idea of a company thrift plan to facilitate small savers saving through industrial schemes. The hon. Member for Glasgow, Craigton (Mr. Millan) would probably admit that there is difficulty in getting employers to run these schemes, which sometimes are administratively complicated, particularly for smaller firms. Anything of this nature which is proved on examination to be helpful should not be rejected out of hand.
I must deal first with some of the general points of the proposition. As has been pointed out, there are serious difficulties. I am not altogether happy about associating National Savings as directly


with taxation as has been suggested. There would be danger of considerable confusion in people's minds—for example, about whether their deductions were made for tax or as savings. Certainly, the existing P.A.Y.E. machine is not capable of operating a scheme of this kind without a very large expansion of staff.
The unsatisfactory nature of the scheme would not be confined to the Inland Revenue but would extend to employees who used it, since nobody would know his position during the course of the year. The essence of Income Tax, whether paid directly or indirectly, is that it is an annual tax. The P.A.Y.E. system is merely a method of spreading tax deductions for an individual throughout the year. For the scheme to be administratively possible and reasonably certain for the taxpayer, it would be necessary for it to be done in such a way that large adjustments do not have to be made at the end of the year. I very much fear that the scheme would introduce these difficulties, both administratively for the Inland Revenue and for the taxpayer.
My hon. Friend the Member for Nottingham, South, who introduced the Clause, said that one of the advantages of the scheme was that the saver would keep control of his money all the time in the sense that he could draw it out or alter his coding number whenever he wished. This factor would make it even more complicated to administer and would increase the possible adjustments which would have to be made at the end of the year.
I do not want to labour the difficulties of the Inland Revenue, but it is important for taxpayers to know their personal tax position as soon as possible after the end of the tax year. Having to make what amounts to a technical assessment in each case when the coding was varied and having to make an assessment more or less at the year's end would cause delays that would be burdensome for the taxpayer as well as for the administrative machine.
I think that the difficulties which have from time to time been brought forward about this scheme so far as employers are concerned are not, possibly, so great as has been suggested, but there are other technical points with which I do

not think I need weary the House. I would, however, mention the special problems about the Post Office arrangements for freeing the first £25 of interest earned under the scheme. I would also add that I ought to correct for the purposes of the record the point which has been made by the hon. Member for Huddersfield, West. So far as I see it, the money which has been deducted and saved is not tax-free in the sense that the reduction in the coding figure would affect only the actual amount of money saved. The residual coding figure is, therefore, on the gross total income, and not on the particular savings. I think that that would be so from the wording of the Clause as it stands.
On the general question of tax relief, we have not an easy problem. I thought that the hon. Member for Gloucestershire, West (Mr. Loughlin) put his finger on one of tthe difficulties, namely, to find a form of incentive which is attractive enough from the point of view of the saver, but not so attractive that it would be unbearably expensive from the point of view of taxpayers generally.
I should like now to deal with some of the administrative problems. First of all, it is necessary that any form of tax relief to encourage saving should be manifestly fair as between all the taxpayers concerned. It is also necessary that it should not mean that the Government had to pay a very great deal too much for its moneys in order to achieve a level of saving which could be achieved by other methods. We must remember that taxation inducements for this purpose may be too expensive and that if the saving was more direct, as for instance in industrial shares or through unit trusts, tax concessions might not only be too expensive but also unfair to other taxpayers. That is not to say that such concessions are impossible, but I cannot advise the House to accept this Clause for the other reasons which I have given.
A further point is that any plan for improving the inducements to small savers must, if it is to work at all, be comprehensive in its nature. It should, therefore, include the role of the National Savings Movement and the trustee savings banks, and so on, in its character. My right hon. Friend the Chancellor said in his Budget speech that he was initiating a


study of the whole problem of contractual saving and hon. Members will know that, in answer to a Question only this afternoon, we stated that this was in progress. Interested parties in the matter of small savings are being consulted, and their ideas will be very carefully studied. Then as soon as it is possible to do so, we shall report on the results of this study. Meanwhile, I really cannot recommend to the House that it should do anything but reject this Clause.
The methods which it proposes are inconsistent, and if account is taken of the interests of the general body of taxpayers it will be seen to be unsatisfactory. The problem of contractual saving, both in the National Savings Movement and its related bodies, should be studied before the nation is committed to any detailed scheme such as is here proposed.

Mr. Houghton: The speech which the Economic Secretary has just made must have been rather a painful experience for him. We remember so well his eloquent speeches in support of this new Clause in previous years, and I am sure that it has been a sad experience for the hon. Gentleman to have to turn it down.
I will not detain the House for more than a few minutes, but I think that it should be said from this side of the House that we are, of course, as keen on promoting private savings as are hon. Gentlemen opposite. Quite frankly, however, this scheme is just a collection of nuts and bolts which could never be erected into a working instrument for regular savings.
My hon. Friend the Member for Glasgow, Craigton (Mr. Millan), with his close knowledge of the working of the Income Tax machine, criticised this proposal on grounds which were perfectly valid. I think that hon. Members on both sides of the House have realised some of the difficulties in grafting a scheme of this kind on to P.A.Y.E. There are all sorts of problems involved, both psychological as well as economic and administrative. It is just not the way of doing it.
We have not yet found a satisfactory method of bringing to bear the element of self-discipline, of regularity and of an adequate return on money invested for which we are all looking as an incentive to small private savings on quite a big scale. This proposal really is a P.A.Y.E.

nightmare. It would drive the Inland Revenue scats. And talk about more staff. It is not staff that we want but computers which have not yet been invented to work this scheme.
Indeed, the hon. Member for Nottingham, South (Mr. W. Clark) who has been trundling this Clause around for a number of years ought to have thought it out better by now, or abandoned the idea or got a new one. The hon. Member for The Wrekin (Mr. W. Yates) is geting agitated. I am not talking about the Yemen but about the Finance Bill.

Mr. W. Yates: The hon. Gentleman must surely sympathise with the idea that this scheme covers the vast area wherein great savings can be made. The Yemen is a small country, but we are now dealing with a vast number of people and vast sums of money. Surely no computer that was ever invented could achieve this object. This more than any other must be the area in which we must look in future for our country's savings.

Mr. Houghton: Yes, I am sure that the hon. Gentleman had better stick to the Yemen.
We all understand how vast a matter this is and how desirable it is. We are just trying to find a workable scheme and we want something which will also provide the necessary incentive to savings on this scale.
I was threatening some of my hon. Friends a moment or two ago that I would be provoked into giving to the House my famous lecture on what is going to happen to the unsophisticated investor in the future, because he is not going to remain unsophisticated all the time. He will soon want a better investment for his savings than those now on offer in the various institutional forms of savings which we have at present.
I will not go further into the matter now except to say that I welcome, for example, the new National Development Bond as a step in the right direction. That, undoubtedly, is an attempt to bring a new Government issue into harmony with the expectations of the small investor today and which combines a reasonable return of interest with a reasonable accessibility to his savings when he wants them. I hope that the new


National Development Bond will do well because I think that it is an innovation that deserves encouragement, and, if I may say so, I propose to say something to this effect in a broadcast which I shall be making very shortly. I do not mind advertising a good thing, even though it comes from a Tory Government.
11.30 p.m.
Obviously, we shall have to leave this aside. We cannot press the House to accept a scheme like this. We must go on looking for a satisfactory means. We call it contractual savings, and this is probably a suitable term for it. But this, I believe, is one of the big challenges of the future, because the contribution of surplus disposable incomes in an increasingly prosperous society will become of greater and greater importance for use for Government purposes as it is available at the present time for all sorts of consumer spending. In fact, savings will have to be put in competition with all the other distractions and attractions which are available to the person with a part of his income which he feels he can dispose of without prejudice to his main requirements in life. That is really what savings will be. It will be a vastly important question. It is important to notice that, as the Economic Secretary told us recently, private savings are increasing more rapidly than corporate savings. That is also an interesting sign, and I think it will be a tendency that we shall wish to see go still further.
With that blessing on the general principle and a very half-hearted commendation of the mechanics proposed, I hope that the hon. Member for Nottingham, South will withdraw the Clause and not embarrass the Chancellor by pressing it to a Division. I can promise the House that by this time next year, I have not the slightest doubt, something more workable, more attractive and with greater possibilities of success will be put to the House by a Labour Chancellor of the Exchequer.

Mr. W. Clark: My hon. Friends and I realised when we tabled the Clause that it was drawn very narrowly, and we are not particularly wedded to the wording of it, but I am tempted to accept the advice of the hon. Member for Sowerby

(Mr. Houghton), who has great knowledge of these tax matters, and, consequently, not to press the Clause to a Division. However, I think it has been a useful debate. With the permission of both sides, I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

Clause 7.—(POOL BETTING DUTY AND BOOKMAKERS' LICENCE DUTY.)

Mr. Maurice Macmillan: I beg to move Amendment 6, in page 8, line 28, to leave out from "offers" to "and" in line 29 and to insert:
stated odds for a choice of bets, being bets of a description not commonly made without such an invitation, unless made by way of pool betting, and not of a description commonly made by means of a totalisator.
This is an Amendment which I undertook, during the Committee stage, to try to table. It is a method of excluding from coupon betting duty the ante-post advertisements in the newspapers. The reason for the somewhat complicated wording of the new definition arises from the need to find a form of words which excludes only ante-post betting and not some forms of coupon and fixed odds betting. This form of words has been discussed with the bookmakers concerned, and I can assure the House that it is possible for them to advertise without attracting duty, and yet at the same time I am advised that the wording is such that the type of operations which we seek to tax will not escape.

Mr. Callaghan: I had representations from the bookmakers telling me that the Chancellor would not collect any duty because this kind of betting would cease. Could the Economic Secretary tell the House whether the bookmakers are satisfied that the way the Clause is now drawn will both enable them to make a living and give the Chancellor some revenue?

Mr. Macmillan: The representations the hon. Member has received concern the duty generally. This Amendment concerns one narrow section, the exclusion of ante-post betting in horse and dog races because they are advertised in a particular form of words which is becoming normal in the newspapers. It is a matter of preventing a newspaper advertisement from being


classified as a coupon for the purpose of the Clause. It does not affect the provisions of the Clause itself.

Amendment agreed to.

Clause 8.—(SURCHARGES AND REBATES UNDER S. 9 OF FINANCE ACT 1961.)

Mr. Maudling: I beg to move, in page 10, line 3, to leave out "four" and to insert "five".

Mr. Speaker: I suggest that we might have a general debate on all the Amendments proposed to Clause 8.

Mr. Maudling: The Amendments go together, Mr. Speaker. The effect is twofold: first, to increase from four to five the number of groups into which we are classifying the indirect taxes for the purpose of the regulator; and, secondly, to enable surcharges or rebates under the regulator to be applied at different percentage rates for different groups. Originally, the regulator, which is designed, of course, for the purpose of economic regulation, operated over the generality of indirect taxes at a consistent rate. I think that this was right, because the purpose was to increase or if necessary, reduce the total level of demand in the economy. The regulator was not designed as a substitute for the annual procedure of the Finance Bill which, I am sure the House will agree, still remains the best procedure we have whereby individual taxes are deployed and the relationships between individual taxes are altered. It would be a great mistake, in my view, if we in any way adopted a procedure whereby the details of indirect taxation were settled by Parliamentary Order rather than through the procedure of the Finance Bill.
It occurred to me, in considering this year's Budget, that there would be advantage in introducing a new flexibility into the regulator by, as I proposed then, dividing the total of indirect taxation into four main blocks and making it possible, if at any time the regulator was used upwards or downwards, to exempt from its operation one or more of these four main blocks.
I think that the feeling of the Committee was that it would be wise to go further. I must confess that I was slightly surprised by this attitude. I had expected opposition to the degree of

erosion of parliamentary control I was proposing but, emboldened by our discussion in Committee, I have now gone a little further with this Amendment.
In the first place, I propose five rather than four groups of indirect taxation. The original four were tobacco, alcohol, hydrocarbon oils and Purchase Tax and minor duties. I am proposing to divide the fourth of these categories into two—one for Purchase Tax and the other for the remaining duties—pool betting, bookmakers' licences, matches, lighters and other minor duties.
My second proposal is that regulator surcharges or rebates should be able to be applied at different rates. This is logical. When one is asking for the right to exempt a particular group from the operation of the regulator, it seems a fortiori reasonable to have the right not to exempt them but to apply the regulator at a lower percentage than is applied to the generality of indirect taxation at a given time.
The purpose of this group of Amendments is to ask, emboldened as I was by the Committee discussion, for more flexibility in the operation of the regulator by putting indirect taxation into five rather than four groups and by taking power to apply the regulator at varying rates between varying groups. I would not advise the House to go beyond that. If we went to go further at this stage, we would be intruding a little too far on the proper procedure of Parliament in settling the relationship between individual duties.
I think that we must stick to the principle that the purpose of the regulator is to change not the pattern of taxation, but the general level of indirect taxation. We now accept that in making these changes in the general level of taxation it should be possible to temper the wind to some of the shorn lambs and that we are not bound to have a single, flat, uniform change over the whole range of indirect taxation.
If the House will accept these proposals, in future we shall be able to use the regulator, when necessary, for the basic economic purpose of regulating the course of the economy in a more flexible and sensible manner, without undermining proper Parliamentary control over the detailed pattern of taxation.

Mr. Callaghan: The Chancellor of the Exchequer has shown a nice appreciation of the division of responsibility that Parliament has for the control of the taxation machine and the economic necessities which have led to the introduction of the regulator itself. I think that he was right to be emboldened to go ahead, because in this connection the House thinks that it is more important that he should have the power to be able to use the regulator for economic purposes than it is to maintain, as it jealously does, its control over expenditure. Having pressed this in the initial instance, we support what the Chancellor has now done.
This also marks an interesting development in economic thinking over the last 10 years or so, in that people more and more now believe that it is better to try to use consumption rather than investment as a means of regulation. This is a marked and important step forward. Our history has shown in the successive stop-goes which we have had over the last 10 or 12 years and with which we have attempted to deal by controlling investment, either by expanding it or by cutting it back, that, on the whole, we have chosen to do it at the very moment when it was beginning to reverse the course which had led us into the stop-go policy. For example, this is certainly true of the 1957 occasion and probably true of 1961, although that is not so sure.
The control of investment is lumpy in its operation and tends to act too slowly. I therefore support and welcome the line which the Chancellor has taken—to operate on consumption, which is bound to take effect much more quickly. I think that this was the proposition of my hon. Friend the Member for Gloucester (Mr. Diamond) in the first place.
We do not want to have a general economic discussion now, but I think that we are learning lessons in this respect. The hon. and gallant Member for Winchester (Rear-Admiral Morgan Giles) is present. He will appreciate that these might be lessons derived from the quartermaster of a ship—if one's wheel has gone hard over and one has to wrench it hard back, the head of the ship then yaws well to the other side and one has to go on putting on other distinct movements to get her back on course.
The value of the regulators is that they will enable fine and delicate adjustments

to the wheel to be made, so that one has only to put it over a point or two to get the ship's head back on course. This is a welcome advance. The Chancellor has tried to do that with the measures which he has taken over the last few months, and I trust that we shall not see any wild spasmodic movements over the next few months.
11.45 p.m.
We on this side of the House welcome what the right hon. Gentleman has done in this extension of the power of the regulator. I think that there is no doubt that any Government would want to use these powers, and in giving these powers to the Chancellor Parliament ought to say that it wants them to be used, that it does not expect them to be allowed to rust, that they are there to be used, and that they should be used as frequently and as regularly as necessary to keep a smooth and continuous path of expansion in the economy.

Mr. Gresham Cooke: I am a little disappointed that my right hon. Friend has not gone further than he has. The hon. Member for Cardiff, South-East (Mr. Callaghan) talked about the necessity for fine and delicate manoeuvres of the economy. I had hoped that the Chancellor would be able to go further. In his speech on 2nd June, during the Committee stage of the Bill, my right hon. Friend talked about breaking down these big groups into smaller compartments. I think that that was his phrase. He has broken this group down from four to five and I had hoped that he would look at the Purchase Tax group as a whole.
The Purchase Tax group is enormous. It covers 35 different types of article ranging from household and toilet requisites to garden equipment and umbrellas, chocolate biscuits, and all sorts of things. It brings in no less than £605 million a year. Suppose the Chancellor wanted to put up the regulator by the full 10 per cent. Suppose, also, that of the 35 industries covered by Purchase Tax, three or four were vital to the export trade of this country. They were doing very well at that time and wanted encouragement, but the remaining 31 could suffer an increase in tax without doing any harm to the economy.
Should not the Chancellor have power to exempt three or four industries from the application of the regulation at that moment of time if he wants them to keep up their production? I am thinking particularly of engineering, where a loss of production would affect the industry's output and its costing very much indeed.
I would, therefore, have hoped that my right hon. Friend would have gone further in splitting the Purchase Tax group to give him power to regulate, say, 30 out of 35 industries, and not apply the regulator to the remaining ones. I hope that my right hon. Friend will say a word or two on that issue, because this is very important if he is to use the regulator at all drastically in the future.

Mr. Crosland: Unlike the hon. Member for Twickenham (Mr. Gresham Cooke), I think that the Chancellor has gone a long way to meet the views expressed in Committee. I think that we ought to welcome these Amendments for three reasons. First,—and this is the very important reason put forward by my hon. Friend the Member for Cardiff South-East (Mr. Callaghan)—this is a further step in the direction of trying to regulate the economy by regulating consumer spending and not investment. If we look at what has been happening to the economy over the last few years, we see that any attempt to regulate investment causes the wildest possible fluctuations, because it cannot be done, and one tends to exaggerate the boom months.
What has been misbehaving in the economy during the last three years is not consumption, not exports, not Government spending, but the level of investment. I think that this is partly the consequence of rather ill-directed measures to control investment, and this increasing emphasis on the necessity to control consumer spending is welcome.
Secondly, we are bound to welcome this, because if we are to have a regulator, let us make it as flexible as we can. There is no point in having a regulator if it is not flexible, and these Amendments make it more flexible than before.
Thirdly, I welcome this for another reason, going beyond what the hon. Gentleman said. Although I agree that it would be wrong to alter the pattern

of taxation outside the annual Finance Bill, it is highly desirable to get away from the idea that everything has to be done in an annual Budget.
The annual Budget comes at the beginning of April. Unfortunately, this does not necessarily coincide with the time when the Chancellor may decide that he should either increase the level of demand or reduce it, and the more that we can get away from the idea that major economic decisions must be taken at the accidental moment of the annual Budget the better it will be for the regulation of our economy. This is one way in which this Chancellor—or, as I hope, my hon. Friend the Member for Cardiff, South-East, the future Chancellor—will be able to take basic decisions about regulating demand other than at some completely accidental moment at the beginning of April.

Mr. Maudling: With the leave of the House, Mr. Speaker, perhaps I may reply.
I agree that this is not a perfect system, but it is the best system we have, and perhaps we had better leave it as it is. I have power by Treasury Order to reduce Purchase Tax at any time if it appears that its level is such as to cause serious trouble, for example, in our export trade.

Mr. Gresham Cooke: Has my right hon. Friend power to reduce the regulator part, or to increase Purchase Tax by the regulator?

Mr. Maudling: Mr. Maudling indicated assent.

Amendment agreed to.

Further Amendments made: In page 10, line 11, at end insert, (d) purchase tax.

In line 12, leave out "(including purchase tax)".

In line 16, at end insert:
and may (subject to the limit of ten per cent. imposed by subsection (2) of the said section 9) prescribe a different percentage, by way of addition or deduction, as respects different groups".

In line 17, leave out subsection (4) and insert:
(4) The percentage prescribed, by way of addition or deduction, as respects a group shall apply to any drawback connected with the duties within the group, but not to any drawback connected with other duties.

In page 10, leave out lines 27 to 29.

In line 40, leave out from beginning to end of line 2 on page 11 and insert:
which, as respects all or any of the groups of duties,—
(a) prescribes a percentage by way of addition to duty, or increases a percentage so prescribed, or
(b) withdraws, or reduces, a percentage prescribed by way of deduction from duty".—[Mr. Maudling.]

Clause 11.—(EXEMPTION FROM EXCISE DUTY OF VEHICLES MODIFIED FOR INVALIDS.)

Mr. Maurice Macmillan: I beg to move, in page 11, line 41, to leave out "special".
This is a very small Amendment, and refers to the controls enabling a vehicle to qualify for Excise Duty exemption. It arose out of a special case which was brought to the attention of the Committee by the hon. Member for Willesden, West (Mr. Pavitt). It takes account of one class of invalid or disabled person, that is to say, a person who meets the somewhat stringent conditions of the Ministry of Health and qualifies for a vehicle or invalid tricycle and yet can drive a motor car with no further alteration than an automatic gear box. By leaving out the word "special" the automatic gear box becomes, for the purpose of the Clause, a device enabling an invalid to drive the vehicle.
I hope that the Amendment will commend itself to the House.

Amendment agreed to.

Clause 15.—(EXTENSION OF DOUBLE TAXATION RELIEF IN RESPECT OF CERTAIN DIVIDENDS.)

Sir H. d'Avigdor-Goldsmid: I beg to move Amendment No. 16, in page 13, line 45, at the end to insert:
(3) For the purposes of the provisions of the Income Tax Acts mentioned in subsection (1) of this section a company shall be deemed to control, directly or indirectly, not less than one-quarter of the voting power in another company if a third company having such control also controls, directly or indirectly, not less than one-half of the voting power in the first-mentioned company.
I moved a similar Amendment in Committee and withdrew it at the request of my hon. Friend the Financial Secretary, who said that he would consider

the wording. Now, to my infinite surprise, he has indicated that he will accept the wording.

Mr. Green: My hon. Friend is right. In Committee, I accepted the spirit and intention of the Amendment, but I asked that we should be given a chance to check the wording, as this is a technical matter. This has been done and it has been found that the wording is as unexceptionable as the spirit and the intention. I urge the acceptance of the Amendment.

Mr. Callaghan: I am sure this is an excellent compact between the Front Bench and a back bench opposite, but some of us would like to know what it is all about.

Sir H. d'Avigdor-Goldsmid: I was under the impression that the hon. Member for Cardiff, South-East (Mr. Callaghan) was present when we discussed this in Committee. I did not wish to take time by going over the matter again.
All that the Amendment seeks to do is to clear up the position in regard to an overseas company which may be controlled by a company operating here. The overseas company may be in a country where, for local reasons, it is not possible to admit of outside control and resort has been made to an intermediary holding company to produce the same result in such a way to conform with the prescribed conditions of the company overseas.
I am sorry that I did not explain this when I moved the Amendment tonight, but it is on the record in Committe. I hope that with that explanation the hon. Member for Cardiff, South-East will be satisfied.

Mr. Callaghan: I speak again by leave of the House. I wondered how Rootes and Chrysler could, in certain circumstances, be included in this.

Amendment agreed to.

Clause 16.—(PLANT AND MACHINERY AND OTHER ASSETS LEASED TO TRADERS AND OTHERS.)

The Solicitor-General (Sir Peter Rawlinson): I beg to move, in page 15, line 35, to leave out subsection (5) and to insert:
(5) Where the deduction by way of income tax relief mentioned in subsection (1)(a) of


this section is a deduction in computing profits or gains or losses of a trade, profession or vocation, or arising from woodlands, and any part of the payments made under the lease by the person obtaining the capital sum is a payment in respect of which a deduction is not allowed for the reason that the whole or any part of the period in which the payment would fall to be allowed is not a period on the profits or gains of which income tax falls to be computed in respect of the trade, profession or vocation, for the reference in the proviso to the said subsection (1) to the amount of the capital sum there shall be substituted a reference to that amount after deducting the amount of the payment in respect of which a deduction is not allowed for that reason.
The House will recollect that Clause 16 was a tax avoidance Clause. The original subsection (5) was found on examination to be not wholly equitable. It was designed to deal with the special position of a lease which fell within the ambit of the Clause and was assigned for a capital sum towards the end of a business which was ceasing. The Clause as drafted could lead to charging a taxpayer on a capital sum by reference to a notional tax relief which had never been obtained. The true answer where it is a ceasing business is in each case that the charge on the capital sum should be cut down by the amount of rental payment for which tax relief has not been given.
The Amendment provides that there should be subtracted from the capital sum received any rental payment for which tax relief has not been given because of the cessation provision. This secures the right answer both for the Revenue and the taxpayer. There is a consequential Amendment to Schedule 7.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 15, line 46, after "allowable", to insert "or made".
This and the following Amendment are drafting and correct the scope of subsection (6). They are needed because subsection (2), which is amplified by subsection (6), relates also to a deduction "allowable" and to a deduction "made" and it is necessary that both these words should be inserted.

Amendment agreed to.

Further Amendment made: In page 16, line 1, at end insert "or made".—[The Solicitor-General.]

Clause 17.—(PLANT AND MACHINERY AND OTHER ASSETS LEASED TO PERSONS CARRYING ON TRADE, ETC.: SPECIAL CASES.)

12 m.

The Solicitor-General: I beg to move, Amendment No. 19, in page 16, line 28, to leave out from "trade" to the end of line 30.
This Clause is another of the tax avoidance Clauses, and it deals with the trader who owns an asset and loans and transfers it to another and then leases it back at a bunched-up rent. It also deals with the position of an associate.
My hon. Friend the Member for Walsall, South(Sir H. d'Avigdor Goldsmid) feared that, as drafted, the Clause might catch the genuine case of the manufacturer leasing to another company in the same group who leases to another who actually uses the asset for trade—a genuine transaction. It is true that the Clause would bite only if the commercial rent were exceeded, but it is appreciated that there could arise considerations owing to obsolescence or a shorter working life, and, therefore, the Clause as drafted might catch traders in genuine transactions which involved no tax avoidance. It could be argued that the Clause does not so bite, but there is a doubt.
I told my hon. Friend that I had formed the view that it would not catch the genuine transaction, but, on reflection, I fear that I was wrong. There is no intention to catch the genuine case, and it is important that there should be no doubt. The Amendment therefore excludes from Clause 17 cases in which the asset was never owned by the trader who makes the rental payment but by an associate, and it cuts out associated persons. They will fall within Clause 16, which deals with the lump sum received. In the genuine case there will not be a lump sum received. On reflection, and having heard what was said when the matter was debated in Committee, we feel that the House should accept the Amendment. It will ensure that the genuine transaction will not be caught.

Mr. Mitchison: I appreciate the Solicitor-General's anxiety not to involve a person who ought not to be involved, but these words were presumably put


in to cover the case in which an association was not as innocent as all that, and by taking them out it seems that the provision which was intended for the non-innocent association disappears, too. Is there any new provision to cover that case?

Sir H. d'Avigdor Goldsmid: I cannot answer that question, but I express my thanks to my right hon and learned Friend the Solicitor-General for the courtesy and attention which he has given to this point. I hope that the hon. Member for Cardiff, South-East (Mr. Callaghan) will excuse me from trying to give a further explanation.

The Solicitor-General: Cutting out the associated persons means that cases will fall within Clause 16. Where there was a genuine case there would not be a lump sum received. If it were a tax avoidance scheme it would fall within Clause 16, because there would be a lump sum received; because that is the whole purpose of tax avoidance. On reflection, we thought it fairer both to the taxpayer and to the Revenue to make the Amendment.

Amendment agreed to.

Further Amendment made: In page 18, line 13, leave out from "section" to end of line 14.—[The Solicitor-General.]

Clause 18.—(LAND SOLD AND LEASED BACK: LIMITATION ON TAX RELIEFS.)

The Solicitor-General: I beg to move, Amendment No. 22, in page 20, line 40, at the end to insert:
being—
(a) where the period over which payments are to be made under that transaction is not less than 200 years, or the obligation to make such payments is perpetual, a lease for 200. years, and
(b) where that period is less than 200 years, a lease which is of the same duration as that period".
Subsection (9) of the Clause defines "commercial rent" in respect of payments which are made but which are not rent, but which are related to rent charges and similar payments. In respect of such charges, commercial rent was defined as the rent which might be expected to be paid under a tenant's repairing lease, but it did not stipulate the term for the lease.

It appears to be impracticable unless the term is stated, because the rent under a notional lease may vary widely.
Building leases, normally, are not for less than 99 years and, taking the life of a building at about 60 years, a term of about 120 to 150 years, which allows undeveloped land to be developed twice, will usually command the highest rent, while a term consistent with good estate management might give a rent for undeveloped land on a lease of 200 years. Thus the Amendment states that
(a) where the period over which payments are to be made … is not less than 200 years, or the obligation to make such payments is perpetual …
then the notional lease is to be taken to be one of 200 years.
The term of 200 years corresponds to a perpetual rent charge because there is no residue. The Amendment also states that where the period is below 200 years, the commercial rent is to be the rent under a tenant's repairing lease for the same duration as the payments.
This period of 200 years arouses comment on the benches opposite, but I can assure hon. Members that it is consistent with good estate management, giving the best rent for undeveloped land, and it is for that purpose that it is thought right to insert this Amendment into this tax-avoidance Clause.

Mr. Callaghan: Even at this late hour, I must point out that this is a purely artificial concept which bears no relationship to reality. History does not bear out what the Solicitor-General says. For example, to go back 200 years, according to the right hon. and learned Gentleman, someone during the reign of George III—I think between 1760 and 1820—said, "If history is to be our guide, by the year 1964 I shall have got the maximum and proper rental out of my undeveloped land." What absolute rubbish! Nobody said that in 1764 and nobody can say today what is exactly right in this case. It is artificial and bears no relationship to reality.
However, because I cannot suggest a figure with any more certainty than the Solicitor-General, I suppose that we had better accept this.

Amendment agreed to.

Clause 20.— (COMPANIES DOING "MUTUAL" BUSINESS.)

Amendment made: In page 22, line 35, leave out Clause 20.—[Mr. Green.]

Schedule 7.—(LEASES TO TRADERS AND OTHERS.)

Amendment made: In page 37, line 44, after "sum", insert:
(adjusted, if necessary, under subsection (5) of the principal section)".—[The Solicitor-General.]

Schedule 9.—(REPEALS.)

Amendments made: In page 40, column 3, leave out line 43.

In page 41, line 54, column 3, at end insert, Section 8(2).—[Mr. Green.]

Mr. Green: I beg to move, Amendment No. 29, in page 41, column 3, to leave out line 55.

Mr. Callaghan: Why does the Financial Secretary want to delete line 55?

Mr. Green: It is consequential. This matter was discussed first with new Clause 11 and again with new Clause No. 7. There has been a full discussion on the subject.

Mr. Callaghan: Why does the hon. Gentleman want to leave out Section 15(5) of the Finance Act, 1962?

Mr. Green: It is consequential upon having accepted the new Clause.

Amendment agreed to.

Further Amendment made: In line 16, column 3, at end insert, Section 12(7).—[Mr. Green.]

Bill to be read the Third time this day and to be printed. [Bill 176.]

Orders of the Day — COMPENSATION AWARD (OFFICIAL REFEREE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. MacArthur.]

12.11 a.m.

Mr. Denzil Freeth: I want tonight to raise a question of principle—a question of principle which came to my notice from a particular case. While, on the question of principle, I understand that I am to be answered by my hon. Friend the Joint Under-Secretary of State for the Home Deparment, I rejoice that my hon. Friend the Under-Secretary of State for Defence for the Army is here, because the particular example from which I wish to proceed to the general principle came to my notice from a case which involved his Department.
The individual case concerned my constituent, Major Cory, who was court-martialled in Kenya in 1961 and found guilty after a trial lasting no less than 43 days. After he had served the sentence imposed by the court he finally succeeded in appealing against its findings to the Courts-Martial Appeal Court. This court quashed his conviction, severely criticised the prosecution during the proceedings of the court-martial, and criticised the summing up. A full resumé of the case will be found in Hansard for 17th December 1963, in columns 1049to 1059.
The essential point is that because Major Cory served his sentence in full before the Courts-Martial Appeal Court quashed his conviction the Government decided that he was entitled to an ex gratia compensation payment. As the House will know, the procedure in such cases is that which was announced by my right hon. Friend the Foreign Secretary, then the Home Secretary, on 2nd May, 1957, when he said:
I have, however, decided that in future where a decision is taken to make an ex gratia payment out of public funds to a person who has been detained in custody as the result of an error not involving legal liability the advice of an independent person of standing should be sought on the amount to be paid."—[OFFICIAL REPORT, 2nd May, 1957; Vol. 569, c. 338.]
In the case of Major Cory the decision to award an ex gratia payment was


taken during the autumn of 1963. He was never informed of this decision, nor were his solicitors. This is why I have to say that the decision was taken "in the autumn" and not on a specific date. Until December, 1963, Major Cory's solicitors were still having what I might describe as desultory correspondence with the Claims Department of the War Office.
The main points, however, are, first, that Major Cory was never told of the Government decision to award him an ex gratia payment and, therefore, of the reference of the case to the Official Referee as the man of standing chosen in this instance to advise the Government. Secondly, Major Cory was never given an opportunity to submit to the person chosen by the Government as the adjudicator or adviser of the amount of compensation any statement of the damage which he had suffered.
The War Office put forward two Maginot lines of defence for the course of action. First, the Department stated that it knew all about the damages which Major Cory had suffered or incurred. Secondly, it stated, to quote a letter from my hon. Friend the Under-Secretary of State for Defence for the Army of 7th May last, that
The procedure followed in Major Cory's case has been entirely in accordance with the arrangements announced in the House in 1957.
This is where the particular reaches out to the general.
To take the first contention of the War Office—that it knew all about the damages that Major Cory had suffered or incurred—I am convinced that the War Office did not know all the damages which he had incurred. It knew part of his legal expenses. It did not know all of them, including counsel's fees. It did not know of all the difficulties he had experienced in gaining equivalent employment, or even employment at all, or the net loss of salary which, at the end of the day, he was suffering because the job which he got was bringing him in less than his Army position.
As to actual figures, the War Office had only two letters from Major Cory's legal advisers, neither of which really went into detail, not least for the reason which the first letter, of 6th May, 1963,

stated—and I quote the letter from the solicitors to the War Office—that
no one in authority seems willing to discuss the matter with us.
As justification, the War Office quoted the words from my hon. Friend's letter which I have just read.
The Home Secretary's announcement in 1957, however, said nothing about the aggrieved person not being told that his case would be referred to an independent person of standing such as the Official Referee. The announcement in 1957 did not state that no representations might be made by the aggrieved person to the person of independent stature so that he might be able the better to compute what he thought would be fair compensation. I ask my hon. Friend the Joint Under-Secretary of State for the Home Department: does she not consider that natural justice demands that somebody who is to be compensated should have the right to submit details of the damage suffered and the expenses incurred?
In a letter to me of 31st January this year, my right hon. Friend the Minister of Defence for the Army wrote:
You will appreciate, however, that these assessments are not made by adding together a number of costed items, but on a broad appreciation of all relevant circumstances and on the assessor's experience of comparable cases.
I appreciated nothing of the sort and I appreciate nothing of the sort now. Compensation, if one thinks about it, must nearly always be compensation for two things. First, it is for bodily pain and suffering or mental anguish which has been experienced.
Here, I agree, a general assessment alone is possible and applicable. The compensation is also for a loss which may either be such a thing as loss of liberty, as in Major Cory's case, where a general assessment alone is possible, but it can also be an actual loss of money, a pecuniary loss or actual extra costs incurred. Surely, these are in almost every case ascertainable.
When my right hon. Friend the then Home Secretary made his announcement on 2nd May, 1957, in answer to a Question from the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes), the hon. and learned Member went on in a supplementary question to


ask my right hon. Friend whether he would
go a little further by giving accused persons an opportunity of adducing evidence and by changing what is now an ex gratia grant into something of the nature of compensation which would bear a direct relation to the wrong which the acquitted person had suffered.
My right hon. Friend replied, rather typically:
That is going too wide. We must be content with small mercies as we get them."—[OFFICIAL REPORT, 2nd May, 1957; Vol. 569, c. 339.]
In fact, the hon. and learned Member's Question referred to evidence and argument about how a possible miscarriage of justice had occurred and its magnitude, that is to say, where there can be no actual computable liability.
This is also borne out by the further exchanges between the hon. Member for Nelson and Colne (Mr. S. Silverman) and my right: hon. Friend, and when my hon. Friend the Joint Under-Secretary replies I hope that she will make it absolutely clear that where it is agreed that some compensation should be paid, whether because of a moral or a legal liability, then surely there is nothing in the then Home Secretary's reply, nor anything in logic, to deny the normal right of an aggrieved person to submit an itemised statement of the losses suffered or the expenses incurred in that connection.
It is no answer at all to say that the Department concerned has submitted its knowledge of these things to the assessors because, even with the best will in the world, no one Department knows all the facts and every fact of a particular case. In Major Cory's case, it most certainly did not, and it is surely an unwarrantable assumption to claim that in all cases it will. Hon. Members are very well aware that justice demands that justice is not only done, but is seen to be done.
An ex gratia payment is made by the Government where there is no legal liability but a moral liability, and the very essence of reference to the Official Referee or some other independent person is to obtain a fair assessment; but how can a fair assessment be made without all the facts? I ask my hon. Friend to put that to her right hon. Friend. Furthermore, an ex gratia payment always contains an element of generosity on the part of the Government: it shows

the Government's desire to compensate for a wrong which it has inflicted, but a wrong which cannot be the subject of a suit in the courts. Surely the whole aim of the exercise is to satisfy the aggrieved person, to do the right and just thing, and to provide compensation which is not only fair, but which is recognisable as such.
Yet this cannot be the result so long as the aggrieved person still feels aggrieved, and so long as independent persons who have examined the matter feel that he is right to feel aggrieved, that he is right to remain in an aggrieved state. One cannot have fair compensation so long as the aggrieved person is not, first, told of the decision of the Government to grant an ex gratia payment and of reference to an independent person such as the Official Referee, and secondly, is not permitted nor even asked to submit a full statement of total losses, damage, and expenses incurred. I do not ask that the aggrieved person should have the right to state his case in person to the Official Referee or whoever is acting as the assessor. The Official Referee would not be apportioning blame, but he should have all the facts so that a fair and proper assessment could be made.
I ask for sense and open justice, and I would remind my hon. Friend that there is a political side to this. The Government at present quite often pay out quite generous compensation, but because of a feeling of injustice which is left, do not gain credit for their generosity, but only odium for their unfairness.
In 1957, the Government set up the Franks Committee on Administrative Tribunals and Inquiries and in the following year, the Tribunals and Inquiries Act was passed and, in this case which I have submitted tonight, I believe that the Government could take a further step along this road of setting right the balance between the individual and the Government machine.
I hope, therefore, that my hon. Friend will be able to announce tonight a change in the machinery or, if not, at any rate will be able to think about it again in time for an announcement to be made before the General Election, even if only in the Conservative Party's election manifesto.
Let justice not only be done, but be seen to be done. If I may make a purely Conservative quotation, Disraeli said, in 1851:
Justice is truth in action.
If the whole truth is not known, and if all the facts are not known and are not accepted as being known, then there can be no justice. That there shall be true and open justice in such cases is my plea tonight.

12.26 a.m.

The Joint Under-Secretary of State for the Home Department (Miss Mervyn Pike): My hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) has been very persuasive in his speech and has explained very fully the reasons which have led him to raise this subject tonight. He has, as we all know, taken a very close interest in this case and I am sure that we all appreciate his concern to see that justice is done not only to Major Cory, but also to others who may find themselves in a similar position.
To put the debate in its context, I should like to remind that House again—and very briefly—of the circumstances of the case which my hon. Friend has used to illustrate his argument. Major Cory, an officer in the Royal Army Service Corps, was convicted by a general court-martial in 1961 of misappropriation of regimental funds. He was sentenced by the court to be cashiered and to serve two years' imprisonment, but the sentence of imprisonment was later reduced by the military confirming authority to one year.
Subsequently, he appealed, and on 9th April, 1963, after he had completed the prison sentence, the Courts-Martial Appeal Board quashed the conviction on the grounds that there had been a miscarriage of justice. The Appeal Court made a number of criticisms of the conduct of the proceedings, which have been fully considered by my right hon. and learned Friend the Lord Chancellor and my right hon. Friend the Minister of Defence for the Army but do not immediately concern us tonight.
Following the quashing of the conviction, Major Cory was reinstated in the Army and received back pay and allowances in full, but, in addition, my right

hon. Friend then the Secretary of State for War decided that a further payment should be made ex gratia from public funds in consideration of the hardship caused by the conviction. Having reached that decision, he invited one of the Official Referees of the Supreme Court to consider the facts of the case and to advise him on the amount of the ex gratia payment.
Finally, after a full examination of the facts and the advice received from the Official Referee, my right hon. Friend authorised payment to Major Cory of £7,500. This was in addition to the back pay and allowances which he had already received. It is, I gather, my hon. Friend's view that this is not enough. He considered that the award did not take sufficient account of either the disgrace or the additional expenditure caused to Major Cory by his conviction, and that more adequate payment might have resulted if Major Cory's solicitors had had an appropriate opportunity of putting his case to the independent assessor.
As the House will realise, it is not for the Home Secretary or me to answer for the decision in Major Cory's case, and, indeed, my hon. Friend does not expect me to do so. He is not concerned tonight to reopen that particular case, but with the general question of the procedure for determining the amount of the ex gratia payment which is made to a person wrongfully convicted.
In referring the case to an independent assessor my right hon. Friend the Secretary of State for War was adopting the procedure which has for some years been followed by the Home Office in civil cases and it therefore falls to me to explain its nature and purpose. The first point that I want to make clear is that we are not here considering the payment of compensation in satisfaction of a legal liability, and this, of course, my hon. Friend has made equally clear.
A person who has been detained contrary to the law has a legal claim to damages for false imprisonment and his remedy is to proceed in the civil courts where his claim may be judicially examined and determined and an award of damages be assessed. But there is no question of false imprisonment in the legal sense in a case of a person who


has been detained in pursuance of a lawful order of the court, even if the decision is subsequently found to be wrong. Any payment from public funds which may be made to such person is made as an act of grace, and there is no right to claim it.
The decision whether to make such an ex gratia payment is essentially one for the responsible Minister. It is only in exceptional circumstances that a Minister will feel justified in authorising payment, but it is not necessary for me to discuss tonight the grounds on which payments are made.
In Major Cory's case my right hon. Friend the Secretary of State for War decided that there were grounds for making ex gratia payment, and what is now in issue is solely the procedure for deciding what the amount of the payment should be. There is, of course, no obligation on the Minister concerned to seek outside advice on this. For many years it was the practice for the amount of payment to be assessed by the Department itself, in consultation with the Treasury, on the basis of all the available information including any representations by or on behalf of the person concerned.
As my hon. Friend said, my right hon. Friend the Foreign Secretary, when he was Home Secretary, felt this to be unsatisfactory, and in 1957 he initiated the present procedure for reference to an independent assessor. This procedure, which has been followed in appropriate cases ever since, is entirely informal. It is the practice for the Department to send to the assessor a comprehensive memorandum setting out the reasons which have led to the decision to make an ex gratia payment and all the circumstances relevant to the assessment of the amount; these include any representations received from or on behalf of the person concerned. These papers are considered privately by the assessor, who then makes a recommendation to the Minister on the amount to be paid. The Minister is not bound to accept this recommendation and the ultimate responsibility for the amount of the compensation remains his, but I must admit that I know of no case in which an award of less than the amount recommended by the assessor has been made.
The use of the Official Referee in the case of Major Cory has, I think, led to some misunderstanding which I would like at this point to try to remove. The assessor acts in a wholly personal capacity, though he is usually the holder of a judicial office. His services are, moreover, entirely voluntary, and I should like here to acknowledge the services so willingly rendered by those whom the Home Secretary has asked to help him in this way. The assessor is not always the same person. In cases of persons convicted summarily we have consulted a senior stipendiary magistrate. In other cases we have invited the opinion of a chairman or deputy chairman of quarter sessions or of one of the Official Referees of the Supreme Court.
In Major Cory's case my right hon. Friend the Secretary of State for War decided to refer the case to an Official Referee, and here I should explain that in his judicial capacity the Official Referee is concerned with the assessment of damages in civil courts, and his experience is clearly invaluable in advising on a claim for compensation such as arose in this case. But—and this is where, I think, there may have been scope for misunderstanding—the Official Referee doss not act in these cases in his judicial office, and the reference to him in no way implies that the case has been referred for judicial determination. He is simply asked for a personal opinion on the facts, and there is no question of his exercising any formal functions.
My hon. Friend argues that the aggrieved person should have the right, if he wishes, to put his own case for consideration by the assessor. I am sure that no one would disagree with this, and there is provision for it in the present procedure. It is open to the person concerned or his solicitor to send to the Minister a full statement of the considerations which he thinks should be taken into account in determining the amount of the payment, and this will be placed before the assessor. In Major Cory's case, for example, all the correspondence received from the solicitor on his behalf was referred to the assessor. I do not think that it would be appropriate or helpful to provide for, as my hon. Friend suggested, a personal hearing by the assessor.

Mr. Denzil Freeth: Will not my hon. Friend agree that there is a difference between the case where the amount of compensation is going to be decided by the Minister himself and where protracted negotiations, as very often happens, go on, as with the Claims Department of the old War Office, and the case where the matter goes to somebody outside the Department to make a once and for all judgment? One of my greatest complaints about Major Cory's case was that at no stage was he ever given to understand that the matter had gone to an assessor for his independent advice, so that a total statement of the case could be made. The solicitors were under the impression that they were still arguing with the War Office, first, whether there should be any compensation, and, secondly, the whole question of a long wrangle over the amount that the Claims Department was accepting. This is the matter of which I complain.

Miss Pike: I agree. This is the nub of my hon. Friend's argument. But I wanted to put the whole procedure forward to show that, in normal cases, it has been found that it gives the opportunity for all the facts to be put before the assessor.
My hon. Friend has made the point very forcefully that, in cases like this, where negotiations are protracted, it is possible that, because of ignorance of the fact that an ex gratia payment is being considered, the full facts of the case are possibly not put forward by the aggrieved person or his solicitor.
I stress that we have not had any criticism of this procedure in the past, because it has been felt that, in stating the claim in the first instance, the full facts had been put forward and that it is open to the solicitor at any point in the procedure to put in more facts or additional evidence should he think it necessary.
My hon. Friend's point is one that we must look at again. There is no doubt that, to see that justice is being done, it is important that the aggrieved person should know he has the right and opportunity to put the full facts of his case and claim for compensation before the Assessor.
My hon. Friend would not wish me to given an undertaking tonight except to say that I have taken the point of his argument. It is a very forceful one and I am sure my right hon. Friend will consider it and, in the light of what has been said, take steps to ensure that, in future, the procedure in these cases is as fair as we can possibly make it.

Mr. Freeth: Will my hon. Friend also undertake to put to the Home Secretary that the whole procedure should be laid out completely and clearly, so that at any stage the aggrieved person or his solicitor knows what is likely to happen and what his rights are?

Miss Pike: I will put all these points before my right hon. Friend.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes to One o'clock.